Since then, there have been several other issues by other countries. To-date, the total issuance of the four global sovereign sukuk has exceeded USD3.5 billion. The sukuk has broadened the investor base by creating a new asset class for both Islamic and conventional investors. This has also been followed by the issuance of global corporate sukuk, which now amounts to USD12 billion. Several of these products are listed on the Labuan international financial exchange. In 2004, Malaysia liberalised the foreign exchange administrative rules to allow Multilateral Development Banks and multinational corporations to raise ringgit-denominated instruments in the Malaysian capital market. Towards this end, two institutions, the International Finance Corporation and the World Bank, have issued ringgit-denominated instruments based on Islamic principles in our market. This has contributed to enhancing the depth of the market. At the international level, Malaysia has also participated actively in initiatives to develop the supporting international Islamic financial architecture. The formation of the Islamic Financial Services Board (IFSB) in 2002 is one of the most important achievements in this development to set the international prudential standards for Islamic finance. To-date, the IFSB has made commendable progress, and this includes the issuance of two exposure drafts on capital adequacy and on risk management. Work is in progress for three other standards that relate to corporate governance, transparency and market discipline, and the supervisory review process. The IFSB has also played a catalytic role in expanding its membership and outreach, thereby contributing further to the global recognition of the Islamic financial system.

The strategy has been to institute the entire financial system chain to ensure its smooth functioning thereby contributing to a balanced allocation of financial and economic resources within the economy, and a greater diversification of risks within the system, and thus achieving overall stability of the Islamic financial system. The initiatives taken include building the required financial institutions, robust regulatory and supervisory framework, effective legal and Shariah framework, the financial markets, effective payment and settlement system, reinforced by the development of the skill talents, and putting in place the mechanism for the operation of the Central Bank. The development of this chain has promoted greater linkages and integration within the domestic Islamic financial system. Attention has therefore been given to the development of the key structural components of the system, comprising the Islamic banking industry, the takaful industry, the non-banking institutions and the Islamic interbank and capital markets. These respective components of the Islamic financial system have now become highly integrated and interdependent. This more diversified financial infrastructure has also enhanced the efficiency in the functioning of the overall financial system. The development of the Islamic financial system in Malaysia started with the establishment of Tabung Haji in 1969 as the first Islamic savings institution. This was followed by the establishment of full-fledged Islamic banking and non-banking institutions. A year after the establishment of the first Islamic Bank in 1983, a takaful or Islamic insurance company was established under the Takaful Act.