It also represents the potential to increase access to financial products through a wider range of new delivery channels. Greater application of IT in the industry can also enhance efficiency by driving down costs for consumers and businesses. Other areas include leveraging on IT in making strategic decisions in the alignment of business, in elevating institutional capacity and operational efficiency and strengthening risk management capabilities. Moving forward, the enhancement of technological capabilities becomes vital for the financial industry as it competes in an increasingly technology-driven environment. The environment and the incentive structure is also important in providing an enabling environment that promotes innovation. In particular, the regulatory framework and the tax structure are important to the innovation process. The regulatory framework should not be so onerous as to impose a high cost and a regulatory burden on businesses. Intrusive regulatory approaches on new products can become a disincentive to innovation. Tax structures can also be designed to support the innovation process. Within financial institutions, organisational structures can also create an environment for innovation by aligning the organization’s processes and implementing appropriate performance incentives. BIS Review 47/2005  1  The pace of innovation that has taken place in the Islamic financial services industry has contributed to the development of a broad and diversified range of Islamic financial products and services that has been able to effectively mobilize financial resources to meet the investment requirements of the economy.

Zeti Akhtar Aziz: Islamic finance - promoting the competitive advantage Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Islamic Bankers’ Forum 2005: Islamic Finance - Promoting The Competitive Advantage, Putrajaya, 21 June 2005. *  *  *  “Islamic finance has become a competitive form of financial intermediation that has been able to meet the differentiated requirements of our economies. In an environment of rapid change, a key factor that will influence the future prospects of the Islamic financial services industry will be the investments to build the foundations on which further progress can be achieved. Investing in the future, in research and development and in the development of talent and expertise will be the differentiating factor that will contribute to the effectiveness, resilience and competitiveness of the industry. This undertaking needs to be the joint responsibility of both the private and public sectors to mutually elevate the performance of the industry and thus increase its potential to contribute to wealth creation and prosperity of our nations.” Your Excellencies, Distinguished Guests, Ladies and Gentlemen, It is my honour to be invited to speak at this Islamic Banker’s Forum organized by the General Council for Islamic Banks and Financial Institutions (CIBAFI) on the strategic approach in developing a progressive Islamic financial system. The occasion of this Forum is indeed an excellent opportunity for the industry practitioners, regulators and academia to deliberate on the key issues that are important to the future of the Islamic financial services industry.