In the case of countries that are just embarking on the introduction of Islamic banks, this could be achieved by the issue of new Islamic banking licences. Third, for countries that have a dual banking system, where conventional banks are allowed to offer Islamic banking products, there must be adequate firewalls to ensure absolute separation of banking operations to avoid co-mingling between the Islamic and conventional funds. This is to ensure the integrity of Islamic banking operations and the sanctity of Islamic funds. The firewalls would need to include separate capital funds, cheque clearing systems, clearing accounts with the Central Bank, settlement accounts and reporting systems. Fourth, regardless of the choice of system, it is important that the stakeholders of the institutions play their role effectively and efficiently to generate improvements in the entity. Of importance, is strong leadership in the management team that has a firm commitment toward performance and capacity enhancements. In addition, investments in the requisite talent and skills is essential to spearhead the development of Islamic financial products. Fifth, is the need to put in place a comprehensive legal infrastructure. Enactment of an Islamic banking law is an important part of this process. For conventional banks offering Islamic banking products, amendments to the existing banking legislation may be necessary to allow such banks to undertake trade-related activities and other multi-faceted functions. The investment policy of the Government may need to be reviewed to provide for the issue of Islamic investment instruments to facilitate the liquidity operations of such banking institutions.

The approach for the implementation of the action plans outlined  BIS Review 49/2005  1  in a Master Plan needs to be done in an iterative manner, taking into account the potential for change that may occur in both the domestic and external environment. The Master Plan will also identify the building blocks of the various parts of the financial sector that need to be put in place to provide the foundation on which further progress can be built. The Financial Master Plan thus provides the sequencing of priorities and identifies the key financial infrastructure that needs to be put in place before advancing forward. In some areas, the implementation can be simultaneous, while in others a more direct route can be taken to enable a more rapid pace of development. In designing and formulating the Master Plan, consideration needs to be given to the diversity of the member countries of the IDB. The member countries are at various stages of economic development, facing different economic and financial challenges, and with different development priorities. The Master Plan aims to highlight the approaches, templates and building blocks that can be adopted at the different stages in the development of a comprehensive Islamic financial system. A phasedapproach would provide the Master Plan with the flexibility to take into account the different stages of economic development of respective countries. While the starting points may differ, countries may adapt the approaches to their requirements and that is commensurate with their stage of development.