As the pace of development of the Islamic financial services industry accelerates, the increasingly more complex and challenging environment will continue to shape the advancement of the industry. Central to this will be the expansion of the business parameters and innovative product offerings. For this, there is increased investment in research and development to yield new instruments and structures to meet the changing requirements of the international community. An area of focus, in particular, is related to the development of mechanisms for risk mitigation and liquidity management. Of importance, are the solutions needed to converge the market requirements and the Shariah compliance. Increased innovation also calls for greater emphasis on the implementation of best practices and higher standard of risk management. Vital to this is the implementation of the prudential standards promulgated by the IFSB. There is also a need to leverage more on IT applications and the strengthening of management capabilities of the Islamic financial institutions. Going forward, with the increased awareness and understanding of Islamic finance, the role of market discipline will become increasingly important in driving Islamic financial institutions towards ensuring Shariah compliance in the operations, in improving operational efficiency and in instituting sound and dynamic risk management practices. The forces of innovation also raise a number of issues concerning the divergence of Shariah views underlying a number of the Islamic financial transactions.
Its significant similarities to the principles in ethical finance and socially responsible investment has been a further factor that has drawn  BIS Review 136/2008  1  interest in Islamic Finance. Islamic finance does not only involve the avoidance of riba (usury) but also extends to issues relating to ethical values, such as fair trade and environmental protection. This has prompted participation from conventional global players in Islamic financial activities and in the acquisition of strategic stakes in Islamic financial institutions. There is also a growing number of established international financial centres such as London, Tokyo, Hong Kong and Singapore that have initiated plans for the integration of Islamic finance into their financial systems. Islamic finance has now become one of the fastest growing segments in the global financial system. The total Islamic assets under management by Islamic banks and conventional banks offering Islamic banking services is reported to exceed USD500 billion. This growth has also been in the other major components of the Islamic financial system. Islamic mutual funds are estimated to be about USD300 billion, while global takaful or Shariah-compliant insurance contributions are estimated to be about USD5 billion. Strengthening the international infrastructure Integral to the efforts in the development of Islamic finance has been the development of the supporting international Islamic financial architecture.