Another conclusion is that interest-rate policy is not enough to achieve financial stability. The policy rate is an ineffective instrument for influencing financial stability, and policy rates high enough to have a noticeable effect on credit growth and house prices will have a strong negative effect on inflation and resource utilisation, even in sectors that are not experiencing any speculative activity. The use of the policy rate to prevent an unsustainable boom in house prices and credit growth poses major problems for the timely identification of such an unsustainable development, as well as for the assessment of whether policy-rate adjustment would have any noticeable impact on the development, and of whether, in the longer run, the development of inflation and resource utilisation would be better (Bean et al. 2010, Kohn 2008, 2009). Other instruments like supervision and regulation, including appropriate bank resolution regimes, should be the first choice for financial stability. Preventing a financial crisis requires not only improvements in the supervision of financial institutions, but also a greater emphasis on the supervision of the financial system as a whole. As regards the regulatory framework, generally, to the extent that financial instability depends on specific distortions, good regulation should aim to attack these distortions as close to the source as possible. Macro-  3  See Svensson (2003) for a discussion of policy options before and in a liquidity trap. 4  See Assenmacher-Wesche and Gerlach (2009), Bean (2009), Bean et al. (2010), Bernanke (2010), Dokko et al. (2009), IMF (2009).
As Islamic finance progresses, it will encounter many new challenges. Many of these challenges will be unprecedented and will vary from one country to another. It is from this perspective that as a collective, we need to collaborate even more closely to resolve some of the problems and bring Islamic finance to become an inherent part of society. Whatever we do today, will determine the shape and direction of the industry. For many of you who will become future thought leaders in Islamic finance, take the many opportunities that will come before you, to sharpen and deepen your skills and knowledge. Collaborate, respect and embrace each other’s views on various matters, no matter how far apart you are in your opinions. Celebrate diversity of views. Avoid polemics that trivialise issues. Debate and discuss the more important matters that concerns the ummah. Think, dig deeper and be innovative in approaching problems and solutions. Look at substance rather than form. Let’s not be argumentative. Let’s not get trapped into matters of no significance. Let’s practice and live the norms and the values that led to the glory days of many civilisations. You are a privileged group. As members of a highly diverse and global group of scholars, you are well positioned to make a difference to the world through Islamic finance. Since its inception in 2006, 86 recipients from 20 countries have been awarded the Shariah Scholarship Award. Right now, we have 40 recipients from 12 countries.