this case, liquidity conditions would remain scarce, leading to a credit crunch with recessionary and deflationary risks. providing insurance against funding or tail risks let me move on to the second principle of providing insurance against tail risks. the recent financial crisis has been a stark reminder of the potentially devastating effects of self - fulfilling crises. self - fulfilling liquidity crises for individual banks are, of course, well there are actually three dimensions along which fragmentation can and should be reduced : the vertical, or intertemporal dimension ; the horizontal, or interpersonal dimension ; and the spatial dimension. see cœure, b. ( 2013 ), “ monetary policy in a fragmented world ”, speech delivered at oesterreichische nationalbank 41st economics conference : “ a changing role for central banks? ” http : / / www. ecb. europa. eu / press / key / date / 2013 / html / sp130610. en. html. see gertler, m. and karadi, p. ( 2011 ), “ a model of unconventional monetary policy ”, journal of monetary economics, elsevier, vol. 58 ( 1 ), january, pp. 17 – 34, and gertler, m. and kiyotaki, n. ( 2010 ), “ financial intermediation and credit policy in business cycle analysis ”, in friedman, b. m. and woodford, m. ( eds. ), handbook of monetary economics, vol. 3, pp. 547 – 599. bis central bankers ’ speeches documented. the experience of bank runs is far from unprecedented. what has been new in the recent financial crisis is the systemic or market - wide nature of bank runs. interbank market freezes and deposit withdrawals from distressed countries are examples of confidence crises that have affected the whole or an important segment of the banking system at the same time. the effects of such systemic confidence crises can be much more devastating owing to externalities. 5 if all banks are distressed at the same time, they will all scramble to sell their assets to be able to meet their obligations. in so doing, asset prices will be pushed on a downward spiral, which exacerbates banks ’ distress and leads to further credit and asset price losses and a further deepening of the confidence crisis. the general scarcity of credit, in turn, leads to a substantial worsening of the macroeconomic outlook. the potential negative aggregate effects of such systemic liquid

pandemic has yet to peak in some countries, others including malaysia are heading towards periods of recovery while continuously managing the risk of virus resurgence. as this phase commences, islamic finance has significant potential and role to play. three attributes, at least, come to mind on how islamic finance can respond and contribute meaningfully towards sustainable and inclusive growth : first, islamic finance must be value - driven and impact - focused to deliver maqasid shariah ( the objectives of shariah ). the intrinsic values of islamic principles are aligned with a vision of economic growth that is balanced, sustainable and inclusive. shariah advocates for balance between wealth creation and wealth circulation. this in turn promotes fairness and ihsan in promoting the attainment of benefits as well as preventing harm. this crisis has indeed created a wealth of opportunities for islamic finance. shariah contracts can deploy a diverse range of capital that is risk - absorbent, patient and philanthropic in nature using instruments such as risk sharing, waqf and sadaqah to support inclusive finance. the flexible nature of such capital encourages allocation of resources towards entrepreneurial ventures and social impact projects that can improve and rebuild well - being of society. it can also to some extent help smoothen structural adjustments in the economy. globally, we have seen a silver lining in the response to the pandemic. in malaysia, the nation has rallied closer together to become more socially conscious not just in aspects of public health and welfare, but also in supporting the local economy. the islamic financial institutions in malaysia, in particular, have risen to the call to generate more positive impact through the “ value - based intermediation ” ( vbi ) agenda. participating islamic financial institutions have endeavoured to refine their products and services offerings in response to the need of their customers. eight islamic banking institutions ( half the total number of islamic banks in malaysia ) are offering microfinancing facility, utilising the micro enterprise facility established by the bank to increase access to finance for microenterprises with viable business. in terms of financial protection, more than 50, 000 participants have benefitted from various microtakaful products that provide affordable or free protection for the hard core poor and individuals with special needs. islamic financial institutions also continue to steward efforts towards building a greener financial system. in august 2020, the vbi community of practitioners in collaboration with the bank issued three sectoral guides on energy efficiency, renewable energy and palm oil for public consultation