Such engagement also facilitates cooperation and collaboration in achieving our shared interest of preserving global financial stability. The combination of indiscriminate lending, excessive risk-taking and overzealous financial innovation were at the root of the current financial crisis. The financial turmoil that first originated in the mortgage market in a number of the advanced economies triggered a broad-based meltdown and subsequent breakdown in the functioning of the financial markets. Despite these developments, the Islamic financial industry has been able to weather this first wave of the global financial crisis, demonstrating its robustness as a stable form of financial intermediation. The resilience of the Islamic financial institutions during this crisis epitomises the intrinsic strengths embedded in Islamic finance that are underpinned by forces of the Shariah principles. This arises from two essential requirements of Islamic finance – firstly, that the financial transaction must be accompanied by an underlying productive economic activity that will generate legitimate income and wealth, thereby establishing a close link between the financial transactions and productive flows. Thus, in the Islamic finance business model, financing or equity participation can only be extended to activities in the real sector that have economic values. Hence, Islamic financial assets are expected to grow in tandem with the growth of underlying economic activities. Secondly, that it is based on profit sharing in which there is a mutual risk sharing. Islamic finance, therefore, impels the Islamic financial institutions to undertake the appropriate due diligence on the viability of business proposals and by enforcing the requirement for transparency and disclosure.

Zeti Akhtar Aziz: Islamic finance and global financial stability Keynote address by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Seminar on Islamic Finance: During and After the Global Financial Crisis – "Islamic finance and global financial stability", Istanbul, 5 October 2009. *  *  *  "The unfolding events during this global financial crisis have brought to the forefront the issues concerning the stability of financial systems and the robustness and resilience of the international financial architecture. At the heart of the crisis is the breakdown of the functioning of the financial intermediation process and the loss of confidence in the financial system. As the world continues to struggle with the consequent global economic recession and the continued fragile financial system, it has intensified the search for solutions. Indeed, wide ranging reforms are now currently being discussed. The future financial landscape in the aftermath of this crisis is, therefore, likely to be significantly different from the present. In the search for the appropriate reforms, there is a general consensus that we need to return banking to its basic functions – to provide financial services that adds value to the real economy. This in fact represents the very essence of Islamic finance. These are the very elements that are espoused in the Shariah principles that underpin Islamic finance and which explains its resilience during this international financial crisis.