While the focus of this Summit will be on Islamic finance, it is inevitable that the discussions today will touch on the recent developments in Europe, given the potential impact it may have on the rest of the world and the need to implement strategies and policies for coping with the consequences of these developments. While the financial solutions being implemented in managing the crisis and the measures being introduced to mitigate the impact of the crisis by the rest of the world is important, it can only provide temporary relief. It is the structural policies and reforms that are more challenging to undertake that will ensure fundamental financial stability and a long lasting self sustaining economic recovery. My remarks today will focus on the changes in the Islamic financial landscape and its increased potential to contribute to sustainable growth, increased international connectivity following the increased pace of internationalisation of Islamic finance and new developments to achieve financial stability in the Islamic financial system. The changing financial landscape and the accelerated expansion in Islamic finance have also resulted in changes in the nature of the supporting ancillary services, including education that is being provided for the business and financial sectors. Islamic finance and fostering sustainable growth As the Islamic financial system evolves to become more diversified and more comprehensive to meet the changing requirements of the real economy, it is increasing its potential to fostering sustainable growth.

Given that the inherent principle of Islamic finance requires that financial transactions be accompanied by underlying economic activity, it already ensures the close link between the expansion in financial assets with the real economy. As the Islamic financial system transitions from being banking centric to becoming more diversified and comprehensive, it has been able to provide the spectrum of financial products and services to the range of activities in the economy, as required by small businesses to conglomerates, and by households to the high networth individuals. The development of intermediaries that previously was dominated by banks now comprises the range of financial institutions that also includes investment banking, specialised banking institutions, takaful, capital market intermediaries and microfinancial institutions. Financial  BIS central bankers’ speeches  1  markets, including the Islamic money and sukuk markets have been instrumental in intermediating funds in the Islamic financial system. The Islamic money market not only facilitates liquidity management but also the implementation of monetary policy. The sukuk market has facilitated the raising of funds by businesses, while providing investors with a range of instruments for investment, thereby facilitating the mobilisation and allocation of funds to productive economic activity. Accompanied by research and development, innovation has intensified. Islamic finance however has the governance arrangements which require the approval process by the Shariah advisories. This ensures avoidance of the creation of financial instruments that have its origins from other financial instruments.