abdul rasheed ghaffour : practical aspects of dispute resolution in islamic finance facilities remarks by mr abdul rasheed ghaffour, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the association of islamic banking institutions malaysia ( aibim ) law seminar on " practical aspects of dispute resolution in islamic finance facilities ", kuala lumpur, 14 november 2017. * * * “ past, present and future : legal certainty and islamic finance in malaysia ” it is my honour to join all of you today in exploring this interesting topic on the practical aspects of dispute resolution in islamic finance. this seminar marks another significant step in fostering dialogue between islamic financiers, shariah scholars and the legal fraternity. gatherings such as this serve as an important platform for islamic finance practitioners to develop a better grasp of legal issues, and for lawyers to gain a keener sense of islamic finance. i am encouraged to see the association of islamic banking institutions malaysia ( aibim ) taking the lead in advancing this mission. disputes in business transactions have been around for as long as commerce itself. it is therefore no surprise that we come across judges and lawyers very early on in human history. earlier than bankers – and definitely long before we see the first central banker. disputes are bound to happen. one party may not be able or willing to honour their obligations. the other party may be dissatisfied with how an obligation is performed. still, there may be a fundamental disagreement between the parties about what was agreed in the first place. it is the inevitability of disputes that makes the existence of dispute resolution systems so universal. dispute resolution in islamic finance is gaining more attention these days. i would take this to be a good sign. in a legal system, disputes may be viewed as an indicator of vigour rather than weakness – so long as they are resolved effectively and efficiently. the common law legal system is exemplary in this regard. today, common law systems are the most widespread in the world, in terms of gdp generated under these jurisdictions. the large volume of commercial disputes resolved by these jurisdictions are a reflection of the widely - accepted strength of the common law legal system in providing certainty to business dealings. today, legal certainty is widely said to be central to the rule of law. it is important that the law be accessible, clear and predictable. people should be assured that questions of legal right and liability will be determined by rules that meet these characteristics. this is not just crucial

briefly outline the reforms undertaken by various jurisdictions. one of the most common features of reforms involves raising the age at which eligibility of benefits can occur. for some, especially in european countries, large tax increases were introduced as an alternative to address serious problems of financing pension benefits. in countries with severe demographic challenges, pension benefits were reduced by way of indexing benefits to wages and consumer price indices. essentially, much of the pension reforms were focussed on reducing fiscal deficits. however, the impact of such reforms has achieved varying degrees of success and in some cases has been noted to have regressive effects. while it is not expected that all countries may make similar choices, striking a balance between maximising returns on pension fund investments and ensuring stable retirement incomes may result in trade - offs that could compromise other developmental needs. for example, poor investment returns on asset classes arising from funded pension schemes may require the government to secure alternative funds to provide sufficient returns for the workers making such contributions. this could potentially stifle the development of other sectors in the economy. moving forward, the challenge is to provide sufficient, affordable, sustainable and robust pension schemes. in this connection, i will attempt to raise pertinent initiatives that will accord the opportunity for us to discuss and develop coherent and converging solutions which are both effective and timely. firstly, the design of a suitable policy framework to provide incentives for more stable long term savings that could negate the effects of reducing living standards after retirement and fiscal strains in the government budget. in this regard, there is a strong need to pursue measures to incentivise and marshal long term savings without making it compulsory, a worthwhile effort in the wake of managing retirement risk implications. the measures involve raising financial literacy and public awareness of the perils of the aging, describing the uncertainties of health care and the limited capacity of government funded schemes ; secondly, with the increasing demand for suitable financial instruments to hedge long - term liabilities and with increased emphasis to strengthen asset - liability management practices to meet projected obligations, further development of the financial instruments that facilitate risk management is therefore critical. in this regard, the government could play a crucial role in the development of financial instruments and the associated market infrastructure. for example, the issuance of large amounts of very - long dated bonds and index - linked bonds in some industrialised nations have helped mitigate risks associated with the duration gaps of asset against liability, inflation and longevity risks ; thirdly is the careful design and implementation