financing, structured financial derivatives, and private equity, retail banking and islamic mortgages. • develop suitable frameworks and applications of pls - based products. at present, the share of equity investment in if ranges from 0 to 24 % of the banking books of islamic banks. pls modalities like mudaraba and musharaka, based on equity partnership arrangements, offer interesting options for innovation. however, weaknesses in legal, regulatory and policy frameworks have impeded their growth. some of the constraints of its effective application 5 include ( i ) equity holders and investors ’ aversion to risk, given the uncertainties over return in pls arrangements, ( ii ) absence of effective property rights in most countries, ( iii ) long term nature of pls financing and ( iv ) higher taxation, compared to interest income, on equity transactions underlying pls arrangements. nevertheless, promoting pls arrangements will not only offer new products but will also address the serious mismatch of assets and liabilities which has aggravated due to the heavy reliance of ifis on short - term, low profit and fixed income assets. 15. in conclusion, it has to be recognized that if services have been transformed from being a peripheral activity to a sizeable industry which is attracting global interest. evidence and arguments presented above make the case that financial globalization will foster if and given the inherent features and richness of islamic principles, modalities and products ’ growth in if will be beneficial for supporting the process of regional and global financial deepening. although currently the size of if is small relative to the global financial system, it has promising growth prospects. well - developed and integrated islamic money, capital, and foreign exchange markets will not only be beneficial for borrowers and institutional investors, they can also further enhance the stability of if institutions, providing them with improved portfolio, liquidity and risk management tools. the challenge for the industry is to consolidate “ lack of profit loss sharing in islamic banking ; management and control imbalances ”, humayon dar and john r. presley ( 2001 ). itself to be able to better compete with global players through achieving scale, efficiency and cost effectiveness in addition to rapidly building its capacities to standardize regulation and supervision, and accounting practices, while strengthening the governance of the industry.

be slackening, though heavy discounting has clouded the underlying picture. there are clearer signs that the slowdown in the housing market is gathering pace. but the impact of this on consumer spending and ultimately on inflation is highly uncertain. and that is what matters for monetary policy. so growth does now seem to be slowing. but what is less clear is whether the scale of this easing is likely to be broadly what we need to keep inflation on target in the medium term – neither too much nor too little. that ’ s not just because we don ’ t know how much slowing is in the pipeline. there are a couple of other important uncertainties too. first, it ’ s hard to judge the underlying strength of inflationary pressures. when inflation picked up quite sharply last winter, there was a lively debate about how far this reflected strong monetary growth, and how far it was due to the temporary effect of a very big jump in gas and electricity prices. although inflation has now come down sharply, there is still room for debate about the margin of spare capacity in the economy. various indicators seem to be telling slightly different stories. on the one hand, overall wage growth seems to have been moderate, by past standards. on the other hand, business surveys of capacity pressures and price expectations remain above average. second, there is a lot of uncertainty about the risks to inflation, if oil prices do continue at their present levels. should we take heart from the relatively muted impact of previous increases in oil prices? or does the fact that workers had already absorbed the impact of a doubling in oil prices since 2004, even before the latest surge, make it more not less likely that they will hold out for higher pay? a key point for the mpc is that its own actions will help to determine how far oil prices have a lasting impact on inflation. there are always risks in signalling that policy will be eased, at a time of rising energy prices. this is all the more so after a year when inflation has been above target and on some measures remains uncomfortably high. on the other hand, we need to be very alert to the risk that the economy may be slowing too abruptly. at current interest rate levels, monetary policy may be on the restrictive side. and the duration and impact of financial turbulence is very hard to call. there must be a risk that at some stage it will spill over into asset and property markets more generally, and trigger a damaging loss of confidence. conclusions the mpc faces a tricky period