quantitative easing and the shock of international oil price caused a destabilizing force to the emerging economies that are fundamentally sustained by domestic demands well - formulated monetary policy. the growth in the capital market has also been challenged by the oil price decline and low interest policy in the advanced market. 7. despite the uncertainty faced by the industry, i am confident that the islamic financial industry could maintain its pace of growth in years to come. there are at least five driving forces to sustain the industrial development including the growth of emerging economies, cross - border financial transactions, innovative islamic financial products, regulatory advancement driven by more advanced and comprehensive regulatory standards, and continuous growth of muslim population. bis central bankers ’ speeches achieving greater sustainability in the economic development and financial outreach distinguished guests, ladies and gentlemen, 8. the development of islamic finance is expected to provide benefits to wide range of customers. those include the low income society that currently does not have access to the financial system to make their life better. according to some studies, it is found that there are quite many people in oic member countries that still live under poverty line. most of them is unable to upgrade their quality of life and turn themselves into productive society due to the lack of assets in hand and the absence of financial products and services with low cost of funds. 9. moreover, due to lacks of other resources, they are also remote from supportive education program and health facilities that are potential to strengthen the basic necessities to gain quality in human capital. without properly designed poverty alleviation program that particular group of people may be trapped in the poverty for ages. in some occasion, low income society has been perceived as involving high risk and too expensive to manage since it requires an extensive effort to manage highly dispersed customers. as a matter of fact, if proper mechanism and procedures supported by well - developed regulation, microfinance industry can also be highly lucrative. 10. islamic finance with a wider application of equity - based financing and micro - finance products can facilitate greater outreach to medium, small and micro enterprises to promote entrepreneurship and value - creating activities. conceptually, greater access to financial services can be provided by commercial based islamic financial institutions such as islamic banks providing microfinance products or micro takaful provided by takaful institutions. other steps can be formulated such as integrating commercial sector with islamic social sector to come up with financial services that are reachable by the micro entrepreneurs and low income society in general. the program is aimed at improving social welfare

until the asian crisis hit in 1997, the existing restriction on capital inflows were only applied to foreign borrowings by banks and companies with government - linked projects and net open foreign exchange position ( nop ) on banks as a prudential regulation. prior to the crisis, this system had contributed to sustained high economic growth, thereby promoting our long term development program. foreign capital inflows had also fostered the deepening of domestic financial sector by expanding market liquidity. however, the benefits of capital inflows, in particular in the early 1990s, were undermined by financial market imperfection stemming from lax regulation and supervision and moral hazard due to implicit guarantees. these problems were reflected in the inefficient allocation of capital, unhedged foreign liabilities, and inflated asset prices. as market confidence in the prospect of the economy of the emerging market in asia faltered, reversal of capital outflows could not be arrested, thereby leading to capital account crisis. with the hindsight of the asian crisis, the central bank has sought to strengthen the monitoring on the capital movement and minimize speculative transactions. to this end, in 2001 bank indonesia issued a regulation on the non - internationalization of the rupiah. subsequently, when a wave of capital reversal and speculation against the rupiah triggered by rising world oil prices heightened in 2005, we issued a series of micro policies addressing the imbalances in the demand and supply in the forex market. furthermore, prudential regulation in the banking sector was also strengthened through a tighter ruling on the nop and particular transactions in forex trading. indonesian floating exchange rate regime needless to say to fellow governors that the choice of an exchange rate system depends to a great extent on the condition of a country at a given time. in the current context of indonesia, under a free capital mobility and limited amount of international reserves, we believe that our floating exchange rate system adopted on august 14, 1997 is an optimal choice. the system, we believe, provides a built - in discipline in a market whereby all other infrastructures are not sufficiently strong. this float will in part create a break on imprudent overseas borrowing, because in doing so market participants will have to factor in the cost of possible movements of rupiah. we are fully aware that in the case of domestic financial markets with imperfections, such as the thin forex market and limited availability of hedging instruments, a floating rate system often leads to high vol