Once confidence had been shattered, the markets responded with brutal speed and force. Monetary authorities without a record of institutional independence and without a sufficiently clear mandate for price stability did not have the experience or credibility needed to restore confidence quickly. The crises helped bring about a fundamental reassessment of the merits of fixed but adjustable exchange rate regimes, regimes that try to exist somewhere in the middle between the opposite extremes of irrevocably fixed and purely floating. The new consensus, which you can now see in policy choices across emerging markets, is that the soft middle is fundamentally untenable for an economy that is open to cross-border capital flows. With the limited exceptions of those cases where full monetary union or a currency board is optimal, or where a fixed exchange rate can provide a nominal anchor for a disinflation strategy, the general view now is that flexible exchange rate regimes make more sense for emerging market economies. Exchange rate flexibility offers the advantage of allowing monetary policy to be directed at sustaining price stability, which in turn offers a better prospect of sustained growth. Changes in fundamental factors such as productivity growth and inevitable shocks to demand and supply require changes in relative prices, both domestically and internationally. A flexible exchange rate makes it easier for relative prices to move rapidly and effectively in the appropriate direction and so generally eases the cost of adjustment.

In fact, in a number of jurisdictions such as Bahrain, Brunei Darussalam, Maldives, Nigeria and Malaysia, Islamic finance is increasingly becoming an important component of the broader financial system. In essence, Islamic finance is impacting the lives of many – individuals and business alike. All these progress would not have been possible without the dedication of Shariah scholars such as yourselves in harnessing collective wisdom to resolve many practical and contemporary issues facing the Islamic finance industry. From enabling deposit taking to facilitating funding, investments and protection solutions – Shariah has been the underpinning thrust of Islamic financial intermediation in meeting the evolving expectations of businesses and consumers. My remarks today will focus on three imperatives for Shariah scholars to be the beacon for financial, social and economic developments. Engagement with wider stakeholders First, the world we live in is not static. It is important to understand that issues confronting the global economy and our modern society are intricately linked to the issues facing the financial sector. This therefore demands for Shariah rulings to constantly be contextualised towards addressing contemporary issues facing the ummah. From ending poverty and hunger to promoting responsible production and consumption; providing affordable housing; better healthcare and education – Shariah deliberations on Islamic finance matters should reflect on the evolving needs of the economy and society. Shariah scholars are constantly challenged to have a thorough and sound understanding of other fields of expertise such as economics, law, psychology and technology to formulate well-rounded and pragmatic ijtihad.