Entering into strategic alliances with other entities would create greater synergy, which may bring about new approaches, new technologies and new areas of specialization. Collaborative efforts amongst Islamic financial institutions in particular, would strengthen the ability to leverage on the industry’s expertise. The introduction of innovative Islamic financial products in a specific jurisdiction can be expanded to other jurisdictions, which in turn, will contribute to broaden and deepen Islamic financial markets and thus strengthen the overall development of the Islamic financial industry. In addition, active collaboration between academic researchers and the practitioners will enable the practical application of research findings. In Malaysia, an industry-owned research and training institute in Islamic banking and finance, the Islamic Banking and Finance Institute Malaysia (IBFIM) has been established to spearhead greater collaborative efforts with universities to undertake research in areas that are key for the progressive development of the Islamic financial industry. 2  BIS Review 47/2005  A highly qualified and skilled pool of talent The fast pace of innovation in global financial services in general and for the Islamic financial services sector in particular, will demand a rapid and continuous infusion and upgrading of skills. Developing a substantial pool of talent and expertise is indispensable for strengthening research capabilities. In this regard, there has to be a strong focus on human capital development through training and education. In today’s competitive environment, intellectual capital is the major factor in determining the level of innovation and competitiveness of an institution or corporation.

My remarks today will focus, in particular, on the issues relating to innovation, which is indeed derived from the investment in research and development, and from the investment in the workforce in the sector. Innovation is key to sustaining growth and securing the competitive advantage. Innovation is about developing new Islamic financial products and services and increasing the range of products and services to meet the more sophisticated and complex requirements of today’s consumers and businesses. It is also about improving the overall efficiency by which the products and services are being provided. Innovation will also involve the introduction of new structures that may contribute towards enhancing convenience for consumers and businesses. Finally, it may also contribute towards creating new markets or expand the existing markets for Islamic products and services. Industry practitioners thus have an important role to promote innovation. Financial institutions need to equip their business strategies with research and development to design new innovative products and services. Such innovative financial products and services which are credible, competitive and Shariahcompliant would indeed find a ready market. The introduction of the global sovereign sukuk more than two years ago was an important innovation that has since gained significant ground. Innovation can also take the form of the application of technology to improve convenience for customers and reduce the cost of financial transactions. In embracing new leading-edge technology, the potential for the Islamic financial industry to provide new products and services will be enhanced.