zamani abdul ghani : building a progressive takaful sector in the overall islamic financial system keynote address by mr zamani abdul ghani, deputy governor of the central bank of malaysia, at the 2nd seminar on regulation of takaful, langkawi, 23 february 2006. * * * bismillahirrahmanirrahim. his excellency dr. bassel hindawi vice chairman, director general of the commission insurance commission of jordan mr. anwar khalifa ebrahim al - sadah deputy governor, bahrain monetary agency professor rifaat ahmed abdel karim secretary - general, islamic financial services board distinguished guests and participants, assalamualaikum warahmatullahi wabarakatuh and good morning. 2. it gives me great pleasure to be here this morning to welcome you to malaysia and to this beautiful island of langkawi. i am also pleased to be invited by the islamic financial services board ( ifsb ) to address this major event that brings together those among us who share deep interest in the development of global takaful and islamic finance. alhamdulillah, we have among us today distinguished market players, regulators, scholars, consultants as well as participants from almost twenty ( 20 ) countries around the world. i also wish to congratulate the ifsb for its efforts in organizing, for the second consecutive year, this international seminar focusing on the regulation of takaful. let me at the outset reiterate the importance of this seminar as a source of collaboration for ideas, sharing of knowledge and exchange of experiences for the continuous developments and improvements of the islamic finance industry. this event is especially important as it touches on new areas such as the regulation and supervision of the takaful industry as only minimum guidance is currently available. ladies and gentlemen, 3. before i continue with this keynote address, let us all take a moment to remember allahyarham dr. mohamed aboulkhair zaki badawi, a great thinker and collaborator for the cause of islam, and particularly in the area of islamic finance. he has devoted so much of his time and energy for the benefit of the ummah. we will always remember his numerous contributions to the development of islamic finance. we cherish his involvement, among others, in the introduction of shariah - compliant mortgage, the establishment of the shariah council to reconcile conflicts between islamic and conventional laws and the establishment of the first islamic financial institution licensed in the united

banks. in the case of takaful operators, they would rely on the islamic banks, through bancatakaful arrangement, to have automatic access to the banks'wide customer base and to leverage on the banks'reputation and prominent position to effectively distribute takaful products. the islamic capital market will also depend on the takaful operators, and to some extent the islamic banks, to participate in subscribing to islamic financial instruments which fulfil the medium to long - term financing needs. in return, the adequate supply and availability of a wide range of financial instruments offered in the islamic capital market has facilitated takaful operator to effectively manage its asset portfolio to match the liability and risk profile of the takaful fund as well as enhances the ability of takaful operator to generate attractive investment return to stakeholders. 9. allow me now to take this opportunity to share with you malaysia's experience in the development of the islamic financial system that has earned malaysia, alhamdulillah, the recognition by the international financial community as a leading islamic financial hub. in developing the islamic financial system, malaysia has adopted a phased - in approach which can be divided into three different phases. the first phase of the development of islamic finance in malaysia began more than three decades ago with the establishment of an islamic savings institution known as the pilgrim fund board, or tabung haji. tabung haji is the first islamic financial institution in malaysia. this was followed by the establishment of the first full - fledged islamic bank in 1983 and the first takaful operator in 1984. the establishment of the first takaful operator in malaysia was inspired by the prevailing needs of the muslim public for a shariah - compliant alternative to conventional insurance, as well as to complement the operation of the islamic bank. insyaallah, by the end of this year we will have a complement of twelve ( 12 ) islamic banks and nine ( 9 ) takaful operators with equity participation by malaysians as well as renowned international market players. 10. in the second phase of the development of islamic finance, malaysia initiated the development of a private islamic financial securities market. the issuance of a broad range of islamic financial instruments contributed in creating a more conducive investment environment for investors who preferred shariah - compliant instruments. another significant development in the domestic islamic financial market was the issuance of ringgit - denominated islamic debt securities by two multilateral financial institutions, the international finance corporation