Zeti Akhtar Aziz: Recent developments in Islamic finance in Malaysia Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Malaysian Islamic Finance Issuers and Investors Forum 2006, Kuala Lumpur, 14 August 2006. *  *  *  Distinguished guests, Ladies and gentlemen, Assalamualaikum warahmatullahi wabarakatuh and a very good morning. It is my great pleasure to be here today to speak at this Malaysian Islamic Finance Forum that has been the joint efforts by the key regulatory and market authorities in the financial services sector in Malaysia, that includes Bank Negara Malaysia, the Securities Commission, Labuan Offshore Financial Services Authority (LOFSA) and Bursa Malaysia. The aim of this forum is to provide a platform for industry players and regulators to interact and discuss recent developments in Islamic finance in Malaysia, the performance of the Islamic financial market, and to provide greater awareness on the innovative products and services and the opportunities for both issuers and investors. Ladies and Gentlemen, The rapid pace of development of Islamic finance in Malaysia has taken place in an environment of strengthening economic growth that is underpinned by strong fundamentals. The growth has been achieved with relative price stability, low unemployment and a strong external balance. The level of savings remains high and external reserves are at a comfortable level at about USD80 billion. Meanwhile, GDP per capita in current prices has increased by an average of 7.1% per annum since 1991 to about $ in 2005.

The wider use of commodity murabahah transactions will also add breadth and depth to the Islamic money market as it facilitates a more efficient distribution of money-market liquidity and expands the range of instruments that market participants can actively transact in. We are pleased to announce that Bank Negara Malaysia will soon be adding murabahah-based transactions to our already diverse range of policy instruments to manage short-term liquidity in the Malaysian Islamic inter-bank money market. The Bank Negara Malaysia's murabahah basedtransactions may either utilise global or Malaysian commodities as the underlying transaction, and in the future, other Shariah-approved assets similar to the Ijarah sukuk notes. The widespread usage of this globally practised financing instrument would allow market participation by a more extensive investor base, including those from the Middle-East. Product innovation must be a continuous and deliberate part of the process of market development. We are therefore firmly committed to developing the capabilities in Islamic finance and strengthening the global pool of talent and expertise in Islamic finance to increase the potential for this to happen. As part of the initiative to meet this objective, we have established the International Centre for Education in Islamic Finance, INCEIF, in March this year to offer professional certification programs in Islamic finance, in addition to, Masters and Doctorate programs. Bank Negara Malaysia has also recently  2  BIS Review 74/2006  made available a Shariah Scholarship Award and Shariah Research Grant, available to Malaysian and non-Malaysians seeking to pursue research studies in Islamic finance.