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

attach relatively little importance to the krona when assessing what would be a well - balanced monetary policy. this means that i instead place greater importance on the improved economic prospects. however, despite the fact that prospects now seem a little brighter, it is still the case that resource utilisation is expected to be significantly below normal over the next few years. this means that there is still a need for monetary policy stimulation to stabilise the real economy. nor does it appear that such stimulation will conflict with the inflation target. inflation measured in terms of the cpif is expected to be slightly below the target of 2 per cent in the next few years. all in all, there is therefore nothing at the moment that calls for a tightening of monetary policy at a faster rate than in our assessment in july. nor can i see, as economic activity has improved, any weighty reasons for making monetary policy more expansionary by reducing the repo rate even further. the adopted line, with a repo rate of 0. 25 per cent that is expected to remain unchanged for several quarters, represents a very expansionary monetary policy. my view is that this policy should only be changed if inflation and / or the economic situation change considerably compared to our current forecasts. concluding remarks i have now shared with you some of my experiences during my early months as a member of the executive board of the riksbank. i realised already when i accepted the job that it would not be easy. however, the fact that monetary policy decision - making is not as straightforward as it appears in theory only serves to make the job even more exciting. a well - balanced monetary policy presupposes that we arrive at a reasonable balance between achieving the inflation target and stabilising the real economy. a reasonable balance requires in turn that we can effectively measure how much inflation deviates from the target and how resource utilisation relates to its normal level. we have fairly good measures of inflation, although it has been a problem recently that our main measure of inflation, the cpi, is so highly affected by our own repo rate decisions through their effects on housing costs. consequently, at our most recent monetary policy meetings we have almost exclusively focused on alternative measures from which housing costs are excluded. the problems concerning how measures of resource utilisation relate to the normal level are, however, greater. it is difficult enough to measure resource utilisation, but it is even more difficult to measure what its normal level is. instead we