and concentrating risks instead. the list goes on. each of these plays a role but if we are to identify a common factor across these various causes it is this : that finance has become detached from economic realities. as we look to develop our financial system, we have to bear in mind that the basic role of finance is to allocate scarce capital to its most productive use. we earn a return only if the capital is deployed to eventually produce goods and services that are valued by the market. when the nexus between the mobilization of capital and the productive use of capital is broken, the returns cannot be sustained – the bubble must eventually burst, with painful consequences. in this crisis, both conventional and islamic financial markets have been affected, but the restrictions on the use of leverage and speculation has put islamic finance in a better stead. in the coming years, as the shariah principles of using capital to build productive capacity gain wider recognition, islamic finance will assume a more prominent role. estimates of global islamic finance assets today range from us $ 700 billion to us $ 1 trillion and one consultancy firm estimates this could potentially grow to us $ 1. 6 trillion by 2012. 4 countries in asia are using islamic finance to fund urban development and public infrastructure projects to meet the growing demands of their populations. the adb estimates that asian countries would need more than us $ 8 trillion of infrastructure investment between kawai and wignaraja, “ the asian " noodle bowl " : is it serious for business? ” asian development bank institute working paper series no. 136, april 2009. oliver wyman, “ the next chapter in islamic finance - higher rewards but higher risks ”, april 2009. 2010 and 2020. 5 international financial institutions such as the islamic development bank are active in funding worthwhile investment projects. the global sukuk market remains a relatively new asset class with much room to grow out. in 2007, asian currency - denominated sukuk outstanding grew by almost 50 % but the market contracted by only 1. 5 % to us $ 64. 3 billion at end - 2008. 6 around us $ 1. 3 billion in sovereign sukuk issuance will come from malaysia, indonesia and singapore in the first half of 2009, and more private sector issuers are expected to tap the sukuk market and to attract new investors and clients. in asset management, an industry report 7 estimates the number of high net worth individuals and their financial wealth in asia combined to be about the same

continued to improve in quality, and central bank numbers have continued to swell. cross - country studies have found that the quality of these institutions and infrastructures is often key to driving growth. 32 in what is perhaps the most comprehensive study of historical experience, daron acemoglu and james robinson have taken the institutional argument one step further. for them, the lack of good institutions is the defining reason “ why nations fail ”. 33 you do not need to go that far to think they have really mattered historically for living standards. the final ingredient in the growth recipe is intellectual capital, for some the source of the industrial revolution, hargreaves, arkwright, watt and all. yet it would be wrong to think innovation somehow began in the 18th century. from the windmill in the 12th century, the mechanical clock in the 13th, the cannon in the 14th, the printing press in the 15th, the postal service in the 16th and the telescope and microscope in the 17th, the innovation escalator was in service well before the industrial revolution, albeit stepped and sticky. 34 moreover, empirical evidence suggests a high degree of history - dependence, or hysteresis, in technology transfer. patterns of technology adoption in 1500 ad are a remarkably good predictor of growth in 1800 ad. 35 this suggests the technological seeds of the industrial revolution were sown well before hargreaves, arkwright and watt arrived on the scene. innovation is more earthly endeavour than heavenly intervention. taken together, this suggests a much broader and richer set of foundations for growth. the seeds of the industrial revolution were sown much earlier, and scattered more widely, than a neo - classical account would suggest. and sociological transformation was at least as important as technological transformation in catalysing the lift - off in growth. patience as a virtue even if you accept this multi - faceted explanation of growth – part sociological, part technological – why did societies suddenly begin accumulating capital at particular points in history? what prompted that initial investment in skills, co - operation, institutions, infrastructure? one answer may lie inside our own heads. for those technological and sociological trends may, in turn, have caused a re - wiring of our brains. underlying all investment decisions are what economists call “ rates of time preference ” – and what non - economists call patience : the willingness to defer gratification today for the benefit of tomorrow, to save rather than spend, stick rather than twist. one simple, economy - wide,