comprehensive islamic financial services industry. malaysia had five years ago launched our own financial sector masterplan which includes the strategic direction for the development of islamic finance forward in malaysia. it has now culminated in the progress that malaysia has achieved today. malaysia has now evolved a comprehensive domestic islamic financial system that is diversified in terms of its institutions, markets and players. the strategy has been to institute the entire financial system chain to ensure the smooth functioning of the system. the initiatives include building the required financial institutions including, the islamic banking institutions, the takaful industry, the nonbanking institutions and developing the islamic money and capital markets. these respective components have recently been progressively liberalized to become internationally more integrated. the supporting financial infrastructure includes a robust regulatory and supervisory framework reinforced by the legal and shariah framework, the payment and settlement systems, the development of the pool of talent and the mechanism for the liquidity operations of the central bank as part of its monetary policy. the development of efficient and active international islamic financial markets the second challenge is to advance further the development of an efficient and active international islamic financial market. well - developed international islamic financial markets enhance the liquidity of the instruments and risk management capacity of the players. this would promote the efficient functioning of the markets and thus facilitate capital flows and thereby strengthen global integration. coordinated initiatives are therefore essential to foster the development of an efficient and vibrant international islamic financial market. sustainable supply of sukuks on a regular basis needs to be ensured. the participation of issuers including multilateral organizations, governments and multinational corporations would contribute to this process. in malaysia, the domestic bond market now accounts for 80 % of gdp. of this, 44 % of the papers are islamic based. a fundamental pre - requisite is to promote innovation in the development of a broader range of islamic financial market instruments. these include instruments with equity ownership features, islamic assetbacked securities, inclusion of permissible forms of credit enhancements as well as shariah - compliant risk mitigating instruments. the development of an islamic derivatives market for hedging is required for market - making activities to support the development of secondary markets. research and development therefore need to be intensified. the shariah fund recently established by malaysia is to support research activities in these areas. this initiative is also to facilitate annual dialogues amongst international shariah scholars. it is to provide a platform for deliberation on the shariah compatibility of newly developed islamic financial instruments and markets. a further

##k now the one - stop platform for both individuals and smes to restructure debt and obtain financial advice. that said, it is equally important for policymakers to ensure that mechanisms for swift npl resolution remain appropriate, not only to prevent an accumulation of legacy npls in the banking sector but also to provide borrowers impacted by this pandemic an opportunity to bounce back once the crisis abates. such a balanced approach helps to preserve the value and productive capacity of borrowers in turn limiting long - term damage to the economy. for malaysia, work is underway to strengthen legislation which will expand the coverage of businesses that can benefit from court - sanctioned recovery mechanisms. this will help flatten the insolvency curve and avoid more permanent scarring, if npl cases were to spike. admittedly, this is an area where there are opportunities to do more and one where all of us can potentially learn from each other. concluding remarks let me conclude. looking ahead, we are cautiously optimistic that the tide may be finally turning in this crisis. however, we certainly can ’ t conclude that the covid - 19 pandemic is firmly behind us. we humbly admit that the virus has wrong footed us several times. the hallmark of good policymakers is to, as the saying goes, “ hope for the best, but prepare for the worst ”. our challenges may differ, but i believe for all of us attending this webinar, our end goal is the same – to successfully navigate the exit from this pandemic and effectively manage any potential surge in npls such that our financial sectors are able to continue to lend support to the recovery process while mitigating more permanent economic scarring. on that note, i wish everyone a day of engaging discussions and fruitful learning. 3 / 3 bis central bankers'speeches