Since then, there have been several other issues by other countries. To-date, the total issuance of the four global sovereign sukuk has exceeded USD3.5 billion. The sukuk has broadened the investor base by creating a new asset class for both Islamic and conventional investors. This has also been followed by the issuance of global corporate sukuk, which now amounts to USD12 billion. Several of these products are listed on the Labuan international financial exchange. In 2004, Malaysia liberalised the foreign exchange administrative rules to allow Multilateral Development Banks and multinational corporations to raise ringgit-denominated instruments in the Malaysian capital market. Towards this end, two institutions, the International Finance Corporation and the World Bank, have issued ringgit-denominated instruments based on Islamic principles in our market. This has contributed to enhancing the depth of the market. At the international level, Malaysia has also participated actively in initiatives to develop the supporting international Islamic financial architecture. The formation of the Islamic Financial Services Board (IFSB) in 2002 is one of the most important achievements in this development to set the international prudential standards for Islamic finance. To-date, the IFSB has made commendable progress, and this includes the issuance of two exposure drafts on capital adequacy and on risk management. Work is in progress for three other standards that relate to corporate governance, transparency and market discipline, and the supervisory review process. The IFSB has also played a catalytic role in expanding its membership and outreach, thereby contributing further to the global recognition of the Islamic financial system.

Cumulatively, these developments have strengthened further the international financial linkages between different jurisdictions and have contributed towards the more efficient allocation of resources across borders. This recent global financial crisis has highlighted the risks associated with financial globalisation. Equally important in the process of internationalisation is therefore the quality of this financial globalization in Islamic finance. Let me touch on two aspects of the financial globalisation of Islamic finance. Firstly, that Islamic finance has been more inclusive in terms of its outreach to not only the participation from the developed world but also from the emerging world, particularly from Asia and the middle-East. This leads to diversification and  BIS Review 20/2010  1  avoids risk arising from over concentration in particular jurisdiction. Moreover, with the relatively better growth prospects in the emerging world, strengthening the economic and financial inter-linkages among the emerging world would mutually reinforce these prospects. The increasing role of Islamic finance in bringing together different parts of the emerging world, and enhancing its links with the developed world would facilitate further this globalisation process. The second aspect relates to the current increased global engagement by the international community to drive the financial reform agenda. As part of this process, it is important for this engagement to be extended to the prudential standard setting entities for Islamic finance as Islamic finance becomes a growing component of the international financial system.