Today, the IFSB has 78 members from all over the world. This will contribute towards the standardisation of the prudential rules and more importantly contribute to the soundness and stability of the Islamic financial system. The International Islamic Financial Market, or the IIFM, which is another leading international initiative, will also contribute towards promoting the development of both the primary and secondary international Islamic financial market. IIFM provides the environment to link all the financial centres around the world that participate in Islamic finance, thereby encouraging active participation by both Islamic and non-Islamic financial institutions in the secondary market for Islamic financial instruments. As the volume increases, it would strengthen the inter-linkages and integration amongst the Islamic financial centres. 3/5  In the area of Shariah, Bank Negara Malaysia is currently promoting intellectual discourse on Shariah issues. Our own Shariah scholars have contributed towards the rapid growth of the Islamic financial products. Earlier this year in conjunction with the IDB Annual General Meeting that was held in Putrajaya, the opportunity was taken to bring the international Shariah scholars together to deliberate the issues and to foster greater understanding and convergence of the practices of Shariah. Bank Negara Malaysia has established a RM200 million dedicated endowment fund to facilitate regular dialogues among the Shariah scholars, to finance research and scholarships, and to facilitate enhanced interaction between the Shariah scholars and the industry practitioners.

These developments were subsequently expanded with the introduction of Islamic windows by conventional banking institutions where Islamic products and services could be offered by these banking institutions. At the same time, adequate firewalls have been instituted to ensure absolute separation of banking operations to avoid co-mingling between the Islamic and conventional funds so as to ensure the integrity of the Islamic banking operations. 1/5  More recently, this structure has been strengthened. Conventional banking institutions that have achieved a critical mass in their Islamic finance operations have the option to transform their operations into a dedicated Islamic subsidiary. Within this framework, Islamic finance in Malaysia has proven to be resilient and able to function effectively and efficiently alongside the conventional financial system. The ability of the Islamic banking institutions to arrange and offer products with attractive and innovative features at competitive prices has appealed to both Muslim and non-Muslim customers, reflecting the competitiveness of Islamic finance as a form of financial intermediation. Since 2000, the domestic Islamic banking industry has been growing at an average of 18% per annum in terms of assets, while growth in the takaful industry was at an average of 28% per annum, with an increasingly more important role in supporting the growth and development process of the country. Attention has also been given to develop both the Malaysian Islamic money market and capital market. A wide range of instruments has been developed to facilitate the effective management of liquidity and funding by the Islamic financial institutions.