Given that the recent financial turmoil has highlighted the importance of strong liquidity risk management, an important recent development to assist in the liquidity management of Islamic financial institutions is the establishment of the International Islamic Liquidity Management Corporation (IILM). The IILM has begun its operations in Kuala Lumpur from early February this year, following its official launch in October 2010. The IILM is tasked to issue short-term multi-currency liquidity instruments that would facilitate the cross-border liquidity management between financial centres, and by doing so, would enhance financial inter-linkages. The first issuance of liquidity instruments is expected to take place later during the year and is very much anticipated as it would contribute to more efficient management of financial flows across borders, thereby leading towards more efficient internationalisation of Islamic finance. The Islamic finance industry is at a stage of growth in terms of products and services, which requires innovation to remain as the driving force behind the progress of the industry. In the pursuit of innovation, it is paramount that the Islamic banking and takaful industry achieve full Shariah compliance in the development and application of their products and services. A robust Shariah governance framework is therefore an important foundation for the Islamic financial institutions to ensure that its objectives and operations are in accordance with Shariah principles. In Malaysia, there have been recent enhancements to the Shariah governance that aim to further strengthen the existing Shariah governance process, decision making, accountability and independence of Shariah advisories.

Joint efforts between academia and industry to conduct research, to explore and deliberate on issues relating to the development of new Islamic financial products, such as the efforts that have led to this conference can therefore provide a point of reference for the industry in ensuring that new and better products are developed to match the diverse and discerning needs of customers, while meeting the requirements of the Shariah. The ability of Islamic finance, as a form of financial intermediation that provides a range of high quality financial products and services, reflect the innovative and dynamic nature of the industry that contributes to its role as a facilitator of economic activity. Together with the fundamental requirements in Islamic finance that an underlying productive economic activity accompanies financial transactions, a close link is formed between financial transactions and productive flows. Given that Islamic financial instruments reflect the underlying economic activities and that such instruments inherently have the potential to provide tangible returns to investors, there have been significant demands on such products. This gives rise to the competitiveness of Islamic finance, which is further spurred by the proliferation of competitively priced Islamic financial products that is more evident in this recent decade. In more recent times, there is increasing awareness and appreciation amongst the international financial community on the distinct nature and inbuilt strengths of Islamic finance. The recent global financial crisis has brought about, among others, an opportunity for Islamic finance to strategically position itself as a stable form of financial intermediation.