Mohd Razif bin Abd Kadir: Islamic banking products – theory, practice and issues Opening remarks by Mr Mohd Razif bin Abd Kadir, Deputy Governor of the Central Bank of Malaysia, at the 2nd Foundations of Islamic Finance Series Conference: “Islamic banking products – theory, practice and issues”, Kuala Lumpur, 8 March 2011. *  *  *  I am delighted to be here today and would like to thank the organisers for inviting me to deliver the opening address at this 2nd Foundations of Islamic Finance Series Conference. Following the success of the inaugural conference held last year in Dubai, this years event is a commendable collaboration between the organisers; the International Centre for Education in Islamic Finance (INCEIF), the International Shariah Research Academy for Islamic Finance (ISRA) and the University Putra Malaysia, to provide an avenue for discussions on various literatures in Islamic finance by eminent practitioners and scholars, with the aim to produce quality publications for the industry. The theme of this years conference, “Islamic Banking Products: Theory, Practice and Issues” is most timely as waves of innovation are pervasive in Islamic finance in the recent years, fostering the generation of a wide spectrum of Islamic financial products and services. As the next frontier of development in Islamic finance evolves through innovation, we have to be mindful that innovation within an environment of constant change and increasing uncertainties is indeed a challenge.

This development positively contributes to the global sukuk market by promoting greater inter-linkages and integration within the international Islamic financial system. Such innovative sukuk products that are universally acceptable would be able to link Islamic financial institutions from different jurisdictions, forming a bridge to strengthen the relationship of the international Islamic financial market as well as the investment and trade links between regions. With the internationalisation of Islamic finance, interest in Islamic finance is indeed no longer limited to Muslim nations and communities. Increased liberalisation that is initiated in this decade has facilitated the internationalisation of Islamic finance which sees Islamic financial institutions venturing beyond their domestic borders and capacity. More than 600 Islamic financial institutions now operate in more than 75 countries. In Malaysia, there is a greater foreign institutional presence and substantial foreign participation in Malaysia’s Islamic financial system. Similarly, there has been an increased of foreign participants to raise and invest funds in Malaysia’s financial markets. The global sukuk market, growing at an average annual rate of about 40 percent has also been a significant platform for such investors, as it effectively intermediates funds across borders, thereby fostering international financial and economic inter-linkages. As the internationalisation of Islamic finance widens the spheres within which Islamic finance operates in, there are growing opportunities and challenges in the business environment that sets the current backdrop for Islamic finance. Continuous capacity and capability measures will be pursued to provide an enabling environment for industry players to remain competitive and innovative.