IILM to boost IFI capacity to facilitate cross-border flows

KUALA LUMPUR, Oct 25 (Bernama) -- The establishment of the International Islamic Liquidity Management Corp (IILM) will further enhance the capacity of Islamic finance in facilitating efficient cross-border flows, Bank Negara Malaysia (BNM) Governor, Tan Sri Dr Zeti Akhtar Aziz, said today.

She said the corporation would enable effective liquidity management not only for the Islamic financial institutions but also for the management of Islamic financial portfolios.

"This development is also significant as it demonstrates an international collaboration among the central banks. The greater collaboration among regulators seen in this decade cumulatively serves to contribute towards the continued resilience of the global Islamic financial system," she said in her welcoming address at the Global Islamic Finance Forum 2010 here today.

Zeti, who will chair the first IILM board meeting, said the meeting, which would be convened on the sidelines of the forum today, would pave the way for its operationalisation. Prime Minister Datuk Seri Najib Tun Razak, who is also present at the forum, witnessed the signing of the Articles of Agreement between central bank governors and bank representatives to set up the corporation She said recently, there has been an increased global engagement in syariah matters among scholars, practitioners and regulators through international platforms. This was a remarkable achievement, given that much of these developments had taken place amid the tumultuous global financial environment, she said.

"The rapid internationalisation in Islamic finance has also been underpinned by the massive flow of knowledge, ideas, technology and people across borders, a process which fosters a greater international understanding on the practices in Islamic finance," she said.

Zeti said Islamic finance has, during this period, been expanding steadily at a double-digit pace with the total Islamic financial assets estimated at more than US$1 trillion (US$1=RM3.06). She said this dynamic growth was driven by two key factors -- the pace of innovation in Islamic finance provided extensive range of financial solutions and the resilience derived from its inherent features provided foundations for financial stability in the Islamic financial system. On sukuk, for example, she said the advancement that has been achieved testified to the ability of Islamic finance in meeting the requirements of today’s differentiated demands of the modern economy.

"The sukuk market has demonstrated its ability to effectively intermediate funds across borders and thus contribute towards the efficient allocation of funds in the international financial system," say Zeti. Today, the sukuk market has become an important avenue for international fund raising and investment activities with the sukuk becoming a truly global product, generating significant cross-border financial flows, she said.

The central bank governor said the internationalisation of Islamic finance was also evidenced by the growing presence of Islamic financial institutions that now operated beyond their own jurisdictions and the increased number of international foreign financial institutions that offered Islamic financial products and services.

Indeed, increasingly, Islamic finance has become part of the growth strategies of a growing number of the global financial players, she said. Besides that, new horizons were also fast emerging, as seen by the concrete efforts for legislative and regulatory changes in several non-traditional markets to facilitate the introduction of Islamic finance in these markets, said Zeti. The Global Islamic Financial Forum, which gathers Islamic financial players as well as Islamic scholars around the world, will be held for four days beginning today. -- BERNAMA