Its emphasis on the close link between financial transactions and economic activity has positioned Islamic finance to be well-anchored to serve the real economy. The adoption of profit- and risksharing, transparency and disclosure, and the universal ethical values of fairness which is implicitly embedded in the Islamic financial system provides the internal checks and  BIS central bankers’ speeches  1  balances. Embraced in its entirety, it enhances the prospects for sustainable economic growth and financial stability. The resilience of the Islamic financial system is also further strengthened by the international prudential standards and best practices that have now been introduced. These include the standards issued by the Islamic Financial Services Board since 2002 in the areas of capital adequacy, risk management, governance, and the conduct of business and supervisory process. The industry is also guided by international accounting standards that have been developed by the Accounting and Auditing Organisation for Islamic Financial Institutions since its establishment in 1990. In enhancing liquidity management in the Islamic financial system, the International Islamic Liquidity Management Corporation (IILM), which was established in 2010, is putting in place the mechanism that will facilitate effective liquidity management solutions through the periodic issuance of short-term Shariah-compliant financial instruments. As the Islamic financial system transitions to becoming more diversified and comprehensive, it provides the spectrum of financial solutions that meet the different needs of the economy. Such financing products offered in Islamic finance also include syndicated financing, equity financing and venture capital.

Zeti Akhtar Aziz: Islamic finance – new frontiers in financing the economy Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the EU-Malaysia Chambers of Commerce and Industry’s (EUMCCI) Quarterly Financial Panel Discussion 2012 “Islamic finance – new frontiers in financing the economy”, Kuala Lumpur, 8 March 2012. *  *  *  In this new phase of globalisation in which economies and financial systems are increasingly becoming more interconnected, we are seeing the emergence of several new trends in trade and investment flows. While there has been a slower expansion in world trade and investment flows in the aftermath of the global financial crisis, cross-border trade and investment activities among emerging economies have been increasing significantly. Asia is very much part of this changing pattern in world trade and investment activity. In Asia, strong domestic demand, supported by resilient financial systems and well developed financial markets have well intermediated these international flows. The most pressing challenge confronting the current global economy is to generate growth and employment. It is particularly important for the crisis-affected economies that growth resumes and is sustained, while addressing fiscal imbalances, public and private sector overindebtedness and the financial sector impairment, the solutions to which will most likely result in slower growth. While supportive domestic policies will thus be necessary to support the growth, also important is the potential growth that can be gained from trade and investment with other parts of the world.