Interest rates charged from the borrowers were set deliberately at levels higher than the normal going rates in the market to avoid any subsidy element 20 . This was necessary to maintain credit discipline, keep undeserving groups away from the project and ensure the long term viability and sustainability of beneficiaries who now have to reckon market costs when preparing micro business plans. The failure of many microfinance projects to realise their goals in many parts of the world can be traced to the failure of the promoters to adopt market based interest rates when designing credit schemes. The objective of subsidising the rates has been to make available low cost funds to the poor, but the subsidy itself generates an excess demand for funds and leads to a higher transaction cost for the borrowers. The transaction cost comes in the form of the opportunity cost of time, money and energy of the borrowers who now have to spend days and days around bank branches to have their loans approved and funds released. Hence, subsidised credit, instead of helping the poor, drives the poor to a greater agony and does not serve its true purpose 21 . Training, in both skills development and leadership, formed an integral part of the Isuru Project. This is because training was necessary to convert an otherwise unbankable group of poor people into bankable individuals with a high credit discipline and determination to take effective lasting measures to come out of poverty.
Such a prudential regulatory design would further complement concurrent efforts that are underway to develop Islamic financial markets and Islamic financial instruments. This architecture will contribute towards the development of a robust and resilient Islamic financial system that can effectively preserve financial stability and contribute to balanced growth and development. Ladies and Gentlemen: In recognition of this need, a proposal was made two years ago to establish an organization to spearhead the development of a uniform set of prudential, supervisory and disclosure standards for the Islamic financial services industry internationally. This proposal was crystallized and endorsed during a consultative meeting of a group of Central Bank Governors, and officials from the Islamic Development Bank (1DB), the Accounting and. Auditing Organization for Islamic Financial Institutions (AAOIFI) and the International Monetary Fund (IMF) in Prague in September 2000 during the occasion  BIS Review 64/2002  1  of the lMF-World Bank Annual Meetings. The endorsement set in motion the formation of a preparatory committee, with officials from Bahrain, Iran, Malaysia and Sudan, and representatives from the IMF, IDB and AAOIFI, to develop the terms of reference and operational structure for the Islamic Financial Services Board. In a meeting of Governors in April this year, Malaysia was mandated to lead a Steering Committee for the establishment and inauguration of the Islamic Financial Services Board in Kuala Lumpur. Today's historic event is the culmination of this extensive two-year consultative process.