in islamic finance, the international shariah research academy ( isra ) was established this year to conduct applied shariah research on the contemporary islamic finance issues. isra also provides a platform that promotes active engagement and dialogue among global shariah scholars that promote mutual respect in shariah and the convergence of views from different jurisdictions in the global islamic financial system. the third strategy is to promote greater financial integration with the global islamic financial system. the malaysian islamic financial system has also been progressively liberalised to allow for increased foreign entry and participation in our financial system, thus facilitating greater cross border flows and thus strengthening the international financial inter - linkages. this has taken the form of issuance of new licences and increasing foreign participation in both islamic banks and takaful companies to 49 %. new licences were also issued to foreign fund managers and foreign stockbrokers. in this new phase of development for islamic finance, malaysia as an international islamic financial hub, has increasingly become a meeting place for businesses from different parts of the world that need to raise funds and for investors that have surplus funds for investment. islamic finance going forward there is now a strong and growing demand for islamic financial products in the global market, far exceeding the current availability of financial products and services being provided by the islamic financial institutions. going forward, there is therefore tremendous upside potential for islamic finance. as the pace of development of the islamic financial services industry accelerates, the increasingly more complex and challenging environment will continue to shape the advancement of the industry. central to this will be the expansion of the business parameters and innovative product offerings. for this, there is increased investment in research and development to yield new instruments and structures to meet the changing requirements of the international community. an area of focus, in particular, is related to the development of mechanisms for risk mitigation and liquidity management. of importance, are the solutions needed to converge the market requirements and the shariah compliance. increased innovation also calls for greater emphasis on the implementation of best practices and higher standard of risk management. vital to this is the implementation of the prudential standards promulgated by the ifsb. there is also a need to leverage more on it applications and the strengthening of management capabilities of the islamic financial institutions. going forward, with the increased awareness and understanding of islamic finance, the role of market discipline will become increasingly important in driving islamic financial institutions towards ensuring shariah compliance in the operations, in improving operational efficiency and in institut

##ing sound and dynamic risk management practices. the forces of innovation also raise a number of issues concerning the divergence of shariah views underlying a number of the islamic financial transactions. while such a divergence of opinions in islamic financial transactions is not a new phenomenon, it has now prompted increased international dialogue among the shariah scholars from the different parts of the world. it is the closer linkages between the global islamic financial markets and the increased platforms for greater engagement on shariah issues that will contribute towards promoting an increased common understanding and mutual acceptance on the rules, standards and shariah views, and for convergence to occur. this would evolve global shariah standards for the islamic financial industry. as islamic finance continues internationalise with expanding scale, there will be greater financial intermediation linkages among the east asian, west asian, and the middle east regions – creating the " new silk road ". while this new silk road of financial flows is enhancing connectivity between asia and the middle east, both regions have, as in the case of the old silk road, extended the new silk road to the rest of the world. global investors and the international financial community have already drawn benefits from the increased diversification of investment activity to the two regions. the expansion of the interlinkages of intermediation to and among these regions would in turn contribute towards a more efficient allocation of capital in the global financial system. closing remarks against a backdrop of an increasingly uncertain global environment, islamic finance, as a form of financial intermediation in the international financial system, has continued to be viable and competitive. in the coming years, the greater global participation in this developmental process, both directly and indirectly, would enhance the potential role that islamic finance would have in contributing towards greater global financial stability in the international financial system.