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President of the Islamic Development Bank Delivers Keynote Address at the 10th Islamic Financial Services Board's Summit

Date posted: 17 May 2013

Kuala Lumpur, 17 May 2013 – The Islamic Financial Services Board (IFSB) kick- started its 10th Annual Summit with a Keynote Address by the President of the Islamic Development Bank (IDB), H.E. Dr. Ahmad Mohamed Ali Al-Madani yesterday. Themed, "The Future of the Islamic Financial Services Industry (IFSI): Resilience, Stability and Inclusive Growth", the Summit's proceedings are taking place on 16 and 17 May 2013 at Sasana Kijang, Kuala Lumpur. Bank Negara Malaysia is the host of this tenth edition of the Summit.

The Summit began with an opening address by the Secretary-General of the IFSB, Mr. Jaseem Ahmed. It was followed by the welcoming addresses from the host of the Summit, H.E. Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia and H.E. Sheikh Abdulla Saoud Al-Thani, Governor, Qatar Central Bank and Chairman of the IFSB.

The Summit coincides with the 10th year anniversary of the IFSB which saw two key figures in the global financial sector, H.E. Christine Lagarde, Managing Director of the International Monetary Fund (IMF) and H.E. Jaime Caruana, General Manager, Bank for International Settlements (BIS) representing their respective organisations to deliver anniversary messages by videos.

H.E. Lagarde, in her message said, "I have always believed and still believe that Islamic finance can be a source of strength and stability moving forward in this financial sector. The Islamic finance and the Islamic financial instruments have grown and developed significantly over the past few years and the IFSB has been extremely active in that respect. An important learning from Islamic finance in general that will benefit the entire financial sector is actually, the close link between financial sector and the real sector of the economy, and how the latter must be actually helped by the former. The financial sector must support the real economy sector."

Meanwhile, H.E. Caruana, in his anniversary message to the IFSB mentioned, "The IFSB has become the global standard setter for institutions offering Islamic financial services. I am very pleased about the collaboration that exists with the Basel Committee. This collaboration is very important as all standard setters have faced some similar challenges and it is happening through many interactions including reciprocal participation in working groups. This well established process has been a mutually beneficial one. The theme of the Summit reflects very well the common goals and challenges for all the standard setters."

Mr. Jaseem Ahmed noted that global policy makers and regulators are stressing the importance of inclusive and equitable growth in achieving economic and financial stability. In particular, regulators have recognised that financial exclusion can lead to financial instability, as well as to more broad based social and political unrest. He further noted that the IFSB's overarching function has been to facilitate – and sharpen – the regulatory and strategic focus on the need of the IFSI. This strategic focus has helped to accelerate financial innovations and growth of the industry – while also serving to improve resilience through stronger and more flexible systems of supervision and regulation.

He also informed the participants about the various initiatives undertaken by the IFSB, which include the Mid-term Review of the IFSI: Ten-Year Framework and Strategies to help serve as guidance for Islamic finance jurisdictions in formulating and implementing their strategies and initiatives in Islamic finance, as well as the development of Core Principles for regulation of Islamic finance which are intended to be used by countries as a benchmark for assessing the quality of their supervisory systems and for identifying future work to achieve a baseline level of sound supervisory practices on the necessary prudential framework on Islamic finance. Another important initiative is facilitating effective implementation of the IFSB standards to help facilitate the creation of a more stable, efficient and internationally integrated IFSI.

H.E. Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia, in her welcoming address, identified inclusive growth and financial stability as new agenda arising from the global financial crisis. Common challenges faced by Islamic finance jurisdictions include poverty, increased inequality and the need for greater social cohesion – hence, the need to return to a financial system that serves the real economy and encourages responsible investment. Evolving regulatory reforms have also changed the regulatory models, increased consumer expectations and heightened competition among market players. She also shared some of the factors that would help towards ensuring the resilience, stability and inclusive growth of the industry, namely core value propositions for the Islamic finance, greater leverage on technology, and product innovation which should take into account the transparency and management of risks and capital.

H.E. Sheikh Abdulla Saoud Al-Thani, Governor, Qatar Central Bank and Chairman of the IFSB, highlighted the need to implement the IFSB standards in different jurisdictions, in particular given the growing interconnectedness and cross border transactions within the Islamic financial markets. Hence, it is necessary to introduce measures that strengthen financial stability, promote a more efficient market and give a deeper understanding of the financial instruments. He also shared specific issues with respect to the industry, namely the issue of standardisation, serious concentration of risk due to heavy reliance on Sharī`ah scholars, strengthening the international accounting standards to further enhance resilience, and putting in place a mechanism that will facilitate effective liquidity management through the periodic issuance of short-term Sharī`ah-compliant financial instruments. The industry also needs to focus on how to increase and improve the access of the financial services to all segments of society so as to achieve a more balanced growth with reduced income disparities.

In his Keynote Address, H.E. Dr. Ahmad Mohamed Ali Al-Madani, the President of the Islamic Development Bank (IDB), stressed the need to strengthen the link between the real assets and the real economy to avoid speculative activities which could lead to a financial crisis. He also shared the sentiment that the developing countries and the IFSI as a whole can only grow and prosper with financial inclusion, as this will allow increased earnings and greater control over financial services among those who are currently financially excluded. Here, Islamic microfinance has been identified as an important area to encourage financial inclusion. Key factors to promote the resilience, stability and inclusive growth of the IFSI include creating a conducive and enabling environment for the industry, adopting the IFSB standards by all stakeholders, increasing the industry’s skilled resources, as well as promoting financial inclusion through Islamic microfinance which is supported by Zakat and Awqaf.

H.E. Dr. Ali Al-Madani called for close collaboration between the IDB and the IFSB in the provision of technical assistance to support countries wishing to promote Islamic finance. He further stressed the importance of a global approach to resolve Sharī`ah differences. He suggested the IFSB to prepare standards on Islamic microfinance in order to bolster the efforts of the IDB for poverty alleviation and rural development. Finally, the President called on IDB's partner institutions to join in hands to improve the prospects of youth employment so that they can benefit from inclusive growth. It will also contribute significantly towards social stability.

In conjunction with this Summit, the IFSB had organised its 10th anniversary dinner in the evening of 16 May 2013. The Summit continues today.

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