The role of the Shariah board in ensuring that all aspects of business operation of Islamic financial institutions are in accordance with the Shariah principles, adds another level of oversight which inherently safeguards against irresponsible practices. Embraced in its entirety, these in-built dimensions of governance and risk management contributes to safeguarding Islamic finance from the potential risks of financial stress arising from excessive leverage or speculative activities. Despite the uncertainties and challenging environment posed by the current crisis, the expansion and development of Islamic financial services industry in global financial system have continued unabated. The dynamic nature of the Islamic financial system is reflected by its solid growth, the increased range of financial products and services and the establishment of new Islamic financial service providers from the different parts of the world including from the non-Muslim world. This increased participation is particularly pronounced in the sukuk market whereby funds have been raised by issuers from various parts of the world. Recent sukuk issuances both in domestic and in foreign currency have attracted interest from a wide investor base from Asia, Europe and the Middle East. These positive developments have been achieved despite the more challenging global financial market environment. As Islamic finance evolves to meet the changing requirements of businesses and consumers, innovation is integral to the development of new Islamic financial products and services. It is also recognised, however, that unfettered financial innovation can become a major source of instability in the financial system.

To promote global financial stability in the Islamic financial system, the Taskforce on "Islamic Finance and Global Financial Stability" was established in 2008 by the IDB in collaboration with the IFSB, together with the participation of industry leaders and international experts to examine the development of further building blocks in Islamic financial infrastructure to strengthen its resilience and ability to meet future challenges. Substantive progress has been achieved by the Taskforce and a report including major recommendations is planned for submission to the IFSB Council in November this year. Among the areas covered by the report include the effective implementation and enforcement of the prudential standards, the supervisory framework, the strengthening of the financial safety net mechanisms and the development of an effective crisis management and resolution framework. Among the recommendations in the report will be the establishment of a Financial Stability Forum to address issues of financial stability in the Islamic financial system. The internationalization of Islamic finance requires the industry to progress into the next stage of international acceptance, with mutual recognition of financial standards and products across jurisdictions. Indeed in the area of Shariah, there has already been progressive convergence of Shariah views and rulings, and the mutual recognition of financial standards and products across jurisdictions. As this continues to occur, it would be a major driver towards greater convergence and harmonization. This has been facilitated through greater engagement among the regulators, practitioners and scholars in Islamic finance across jurisdictions. This interface is important given the common interest of global financial stability.