The people can rightly expect the central bank to have an important role in this: giving them the good life. But they do not stop here. People also want the good life to continue, avoiding the excessive boom and bust cycles and, of course, avoiding unnecessary crises. They invariably want more and more of better goods and services. This requires the economy to not only simply produce at a high level, but also to make adequate capital formation to generate a high growth rate. There are many factors other than investment that affect growth - things like productivity, innovation and education. But they are outside the realm of central banking. Within the area of central banking, however, the general public can rightly expect the central bank to provide them with an environment conducive to growth, without the excessive boom and bust cycles and avoiding crisis whenever possible. What else do the people expect? People also expect a fair distribution of opportunity and income. Central banks generally do not have a direct hand in providing equal distribution of income, much less opportunity. This responsibility generally lies with the overall machinery of government. Nevertheless, high inflation, if it exists, does have an adverse effect on real individuals’ income, especially those in the lower brackets who are less able to renegotiate their pay.
It is the product of three decades’ work in building strong foundations for the sector to thrive and grow. In reflecting on our journey of developing a vibrant Islamic financial system, imperatives in three areas stand out – Infrastructure; Players; and Talent. Allow me to briefly elaborate on these three areas. First, infrastructure. Similar to developing a conventional financial system, having a robust regulatory and supervisory regime is critical for the development of a strong, resilient and inclusive Islamic financial system. What is unique about Islamic finance is the need for a clear Shariah governance framework to ensure Shariah compliance. In Malaysia, the Islamic Financial Services Act 2013 sets out a regulatory framework for end-to-end Shariah compliance. Bank Negara Malaysia is vested with comprehensive legal powers under this Act to regulate and supervise the Islamic financial system. Complementary to this is the role of the Shariah Advisory Council in ensuring greater certainty in Shariah. While our Shariah Governance Framework has met its intended objectives, we are now in the midst of reviewing and strengthening the framework in response to the evolvement of the industry. The Securities Commission Malaysia and the Labuan Financial Services Authority are also vested with similar powers, and are equally committed to building a robust and comprehensive framework for Islamic finance in Malaysia. Our policies also strive to be forward looking and responsive to the needs of the world.