funds. in parallel to these developments, if has progressed on capital market development. few significant development on this front are : ( i ) islamic benchmark has evolved to provide an alternate to libor by introducing islamic sovereign paper. some initiatives include ( a ) sudan government investment certificates based on pool of ijara, salam, and murabahah instruments to raise long term financing, one year maturity government musharakah certificates based on equity partnerships ; ( b ) bay al - dayn ( debt trading ) government investment issues ( gii ) by malaysia ; and ( c ) baharian al - salam sukuks whereby government agrees to sell forward to islamic banks a commodity ( typically aluminium ) against spot payment. islamic banks in turn designate the government their agent to sell the ijara sukuk are financial obligations, issued by lessor, and backed primarily by cash flows from lease receivables from a credit lessee. arsalan tariq : “ managing financial risks of sukuk structures. ” commodity to a third party on delivery and the price of sale determines the price of the sukuk. ( ii ) islamic investment indices. equity benchmark indices are designed to track the performance of leading publicly trading companies who are involved in activities consistent with islamic shariah law. examples of this are dow jones and ftse islamic indices which focus on limited range of companies excluding companies which are involved in products / businesses not permissible under islam. ( iii ) islamic equity funds include shariah - compliant equity and hedge funds, commodity, leasing and trade related funds. barring equity funds, other funds are low risk. in the case of leasing, the fund is a securitized pool of lease contracts dealing with collateralized assets generating a steady stream of cash flow. similarly, commodity funds have a short - term exposure in markets that are efficient and have developed forward markets, thus reducing the level of risk. in contrast, equity funds are similar to conventional mutual funds and are exposed to a higher degree of risks. such funds are designed to ensure that equity stocks included in the fund are not only well diversified but also fully compliant with the shariah ’ s guidelines. ( iv ) development of derivatives and its equivalents. there is a debate on whether if allows setting price at a future date with some scholars arguing it is not permissible and others with flexible interpretation that forward trades are permissible in islam, if structured to provide specific quantity, time,

##h compliance of all bank operations. shariah advisory board has shariah scholars but also industry representatives. • bahrain, sudan and syria have adopted shariah standards issued by the accounting and auditing organization for islamic financial institutions ( aaoifi ) and some others use them as guidelines. both the prudential regulation and shariah inspection and supervision are integral elements of the check and balances to ensure products and transactions meet the test of authenticity and compliance with shariah. while these systems may not be in place right away but development and implementation of this regulatory and supervisory infrastructure requires build up of capacities both at institution and regulators level and will pave way for building confidence in islamic system. e. conclusion in conclusion, from a regulator ’ s perspective development of if in tandem with conventional finance will help broaden and deepen financial markets which will help not only meet diverse requirements but will also infuse financial stability. the evolution and path pursued by if industry has triggered debates regarding the authenticity and innovation. what is critical to recognize is that if by design has to be authentic and brings in additionality both in terms of superior corporate governance framework as good ethical practices are embedded in if, and risk sharing structures which along with product diversity that the system offers lend itself to innovation. product proliferation and approaches to security markets, development of islamic exchange and fund management will help nurture financial diversification from bank based to market centric system. proper application of pls system will help provide greater opportunities for innovation provided it is backed by the right corporate governance architecture. on their part regulators have provided the industry free play. cooperation among regulators has helped to develop core and supportive if infrastructure which better weaves in the unique features and nuisance of the if. development of islamic prudential regulatory and supervisory framework, which subscribes to basel standards for conventional banking, will pave the way for development of if, while tweaking the regulations to accommodate special risk characteristics of the if. institutional framework and evolving approaches for supervision systems will help build confidence among investor and customers. it is my belief that proper practical application of if has the potential of taking global finance to new frontiers and heights.