model of governance. conclusion in conclusion, encouraging developments and trends in islamic finance lend confidence that this industry has taken off. however, there are varying motivation and driving factors for the development of this industry ranging from religious fervor to the opportunities that exist in islamic finance for broadening and deepening the process of financial intermediation which augurs well for financial innovation and engineering, enhancing the financial services penetration in national jurisdictions and for cross border capital flows. while the size of islamic financial industry is still quite small as a proportion of the total world ’ s financial assets, the current growth trends and the investments in infrastructure in development of its islamic finance networks and its regulatory and supervisory systems, lend confidence that this industry has promising potential. prospects for this industry appear comforting because of variety of factors – most significant being the strengths of islamic ideology and economic system which offer a complete framework for the islamic finance industry. islamic financial system lays down rules of conduct and contractual arrangements, and offers feasible financing structure which emphasize trade and equity financing that together will help the much needed financial diversification in islamic countries. islamic finance also has potential to blend economic and social objectives and address the ethical aspects of financing effectively. as such it is generally more acceptable in populations with moderate to strong inclinations toward managing their financial relationships in line with their beliefs. this can thus help in poverty alleviation through inclusion of a larger proportion of population into the banking system giving them access to credit and mobilizing their savings effectively. the emerging solutions and application to structure islamic finance innovatively have helped cater for all types of markets and financing requirements ranging from retail to project and home financing to equity funds and products and insurance. industry effort to benchmark pricing and apply legal, regulatory service standards at par with conventional products and standards has also helped encouraged confidence in the system. going forward, the sustainability of islamic finance would rest in how the international community builds on the momentum achieved thus far. this would require ( i ) further deepening the efforts to enhance the legal and regulatory framework of islamic finance consistent with the international practices. ( ii ) continued strive to conform and align the structures and products in line with the shariah principles would help muslim population ’ s motivation to turn to this see “ building an effective islamic financial system. ” dr. shamshad akhtar, governor of the state bank of pakistan, at the global islamic financial governor ’ s : financial regulators forum in islamic finance, kuala lumpur, 27 march 2007. alternative mechanism of financing

growth and trends spread across 70 countries, islamic finance has grown to almost a $ trillion industry. despite its growth, given its current size and composition it is still a niche market in the overall global financial industry. prospect for the industry are quite bright given strong demand for financial services from a large segment of about 1. 4 billion muslim populations and need to channel effectively rising foreign savings and high net worth individuals. the growth, level, interest and motivation to promote this industry vary across the globe. the growth in gulf cooperation council has been exceptional with bahrian emerging as a main centre adopting and implementing islamic banking regulation, being the first central bank to issue sukuk and establishing centre for islamic finance education, etc. iran and sudan declared sometime back 100 % conversion to islamic banking. within south east asia, malaysia stands out with $ 31 billion islamic banking assets, $ 1. 7 billion takaful industry and has the largest islamic private debt market which constitutes 45. 5 % of its total debt market. 1 other countries in south east asia have smaller islamic financial markets and singapore has positioned itself to offer strong wealth management potential. within south asia, pakistan stands out for its proactive and systematic stance to evolve islamic finance industry. in all these countries, assets of islamic banking have grown faster than the overall banking assets and scope and coverage of financial services has been extended to retail and consumer finance, private equity, structured products, insurance and project finance etc. distinct from islamic countries, is the interest of few global financial centers such as london that now provide policy and tax incentives to promote islamic finance industry to attract funds from high net worth clients. same motivation seems to have driven global banks such as hsbc, standard chartered, deutsche bank, citibank etc. to set up special hubs to structure islamic finance products. in reality, while current hype in industry may be partially driven by availability of surpluses generated by oil revenues, islamic banking is emerging as an alternate financing option that coexists alongside the conventional financial industry. moving from traditional islamic products, now the industry is offering consumer financing for residential purposes and structuring financing vehicles for supporting infrastructure and housing finance projects etc. product innovation is emerging with several different types of hybrid sukuks and other combination of structures which involve different forms of musharikas with other products. notwithstanding these developments, increasing share of equity based credit products, such as murabaha and ijara, remain the dominant form of islamic financing across the islamic