The Islamic financial system thus has an in-built dimension that promotes financial soundness and stability, as it resides within a financial trajectory underpinned by the forces of Shariah injunctions. These Shariah injunctions interweave Islamic financial transactions with genuine productive activities and prohibit involvement in illegal and unethical activities. This intrinsic principle of governance contributes towards insulating the  1  ICLIF Leadership Competency Model – Syed Naquib al-Attas & Wan Mohd Nor Wan Daud. BIS Review 95/2007  1  Islamic financial system from the potential risks of financial stress triggered by excessive leverage and speculative financial activities. Equally important is that the key components of the Islamic financial system, comprising the financial institutions, the markets and the financial infrastructure, has demonstrated its viability and robustness as a form of financial intermediation, with a mutually reinforcing role in enhancing the overall stability of the financial system. Its growing role in mobilising and channeling the funds to productive investment activities across borders brings significant benefits to the global economy. Firstly, it has the potential to contribute global growth and contributing towards some rebalancing of the global growth given that it brings about a more inclusive financial integration. Secondly, the strengthened international financial linkages allows for the potential for greater diversification of risks. The increase in the Islamic financial products, the growing number of assets classes being offered, the increased cross ownership of assets have all expanded the possibilities for greater diversification of risks and the potential for return.

Zeti Akhtar Aziz: The international dimension of Islamic finance Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the 2007 INCEIF Global Forum "Leadership in Global Finance – The Emerging Islamic Horizon", Kuala Lumpur, 30 August 2007. *  *  *  It is my honour and great pleasure to be here to speak at this first INCEIF Global Forum, which has drawn together a distinguished gathering of scholars, researchers and practitioners from the financial services industry. Let me focus on the international dimension of Islamic finance which has continued to gain significance. Islamic finance now extends beyond the traditional predominantly Muslim economies to become an increasingly important part of the international financial system. Total assets of the Islamic financial system are estimated to exceed one trillion US dollars. It is among the fastest growing financial segments in the international financial system with an estimated annual growth of 15 to 20 percent. There is now a growing demand for Islamic financial products in the global market, far exceeding the supply of financial products and services that is being offered by the Islamic financial institutions. As we advance forward, the international environment in which we are operating is also rapidly evolving to become more complex, competitive and challenging. In the current environment it has become more volatile and uncertain. The challenge for Islamic finance is to evolve strategies that will ensure its competitiveness, dynamism and sustainability.