, which formulates the international regulatory and prudential standards for islamic finance. it has since issued the standards for capital adequacy, risk management and corporate governance. among the standards that are currently being formulated include market conduct and rules for financial disclosure, transparency, the shariah governance framework and the supervisory review process. this is to ensure best practices and the soundness and stability of the islamic financial system. the ifsb now has 137 members that include 35 regulatory and supervisory authorities, five international inter - government organisations including the bis, world bank and the imf, and 97 market players and professional firms from 22 jurisdictions. of significance to note is that the membership of the ifsb comprises several authorities and international institutions from the non - muslim countries. the ifsb complements the accounting and auditing organisation for islamic financial institutions ( aaoifi ) which was established earlier in 1991, to set the accounting standards to ensure that the true and fair value are reflected in the financial transactions and to ensure greater accountability and responsibility of the financial institutions. finally, these developments have been reinforced by greater liberalisation to increase the international dimension of islamic finance. with increased international participation in islamic financial markets, it has prompted increased cross - border islamic financial flows. in addition, islamic financial institutions that had previously operated only in their own domestic jurisdictions have begun to venture abroad to tap new growth opportunities in other regions. this new international dimension of islamic finance has enhanced further the international inter - linkages in this more globalised environment. islamic finance : operating in a challenging and evolving environment the evolution and expansion of islamic finance has occurred in a fast changing and dynamic international environment. in the context of a more challenging and competitive environment, the issue of financial stability, viability and competitiveness are paramount. this is particularly evident in the recent developments experienced in the international financial system. an important element of islamic finance is the strength and soundness it derives from its shariah principles. islamic finance has an inbuilt dimension that promotes soundness and stability, underpinned by the shariah injunctions. these shariah injunctions essentially interweave the financial transactions with genuine productive activities. the soundness and viability of islamic finance as a form of financial intermediation is premised on the fundamental requirement that islamic financial transactions need to be supported by an underlying productive activity. there is therefore always a close link between financial and productive flows. the financial transaction has to be accompanied by genuine trade or lease

quality and affordable financial services to a regional sme client base. it is paramount for smes to embrace these technological enhancements. this includes the adoption of end - to - end supply chain management solutions that integrate the production and financial flows of sme activities, allowing for greater expansion into regional production networks. together with digitalisation, the financial integration process will catalyse the convergence of institutional frameworks across asean countries to create a more effective regional financing ecosystem. such institutional infrastructures and instruments include credit guarantee schemes and credit and collateral registries. another example is the asean sme working group ’ s methodology for the asean benchmark for sme credit rating to facilitate the establishment of credit bureaus in asean member states. through these credit bureaus, as estimated by the asian development bank. bis central bankers ’ speeches financial institutions would have wider access to reliable credit records of smes, thereby increasing the access to financing for the smes. the promotion of deeper financial inclusion can be regarded as the final mile in enhancing and enriching the regional financial integration process. the asean finance ministers ’ and central bank governors ’ meeting in march this year elevated financial inclusion as a regional policy priority. indeed, asean will continue to coordinate and intensify efforts to advance financial inclusion, including addressing cross - border financing issues for sme trade financing and investments. this is critical to ensure the benefits of regional integration are experienced by all in the region. conclusion while the future for asean looks promising, asean businesses, including smes, need to consider and explore an asean strategy and to view asean as an increasingly integrated market. having such regional or international perspectives may prove to be a game changer for smes, paving a path towards sustained growth, increased job creation, and higher innovation capacity. a crucial element in the asean economic agenda is the development of the sme sector which will contribute to stronger and more equitable growth in the region. the next frontier for smes is to emerge as regional players that are not constrained by the domestic consumer base. smes possess the potential to participate in global production networks by riding on asean ’ s intrinsic strengths and prospects, multiple sme - focused policy initiatives as well as the continued wave of regional financial integration. this will allow for the transition for smes to benefit immensely from the ongoing regional economic and financial integration and thus contribute towards a balanced and sustainable growth of our region. bis central bankers ’ speeches