How this can best be achieved is a subject for much discussion around the world at present. It is important to realise that the starting point for this discussion is somewhat different in different countries. In countries that have already been hit hard by the crisis the unthinkable has already happened, so to speak. There it is necessary to consider how to prevent this from happening again, but as housing prices have already fallen and households have already begun to reduce their debt, the situation does not appear acute. In other words, they have a little time to find a way of preventing the next crisis. The situation in Sweden is different. Here we have not had any tangible fall in housing prices, at the same time as household debt is at a high level, both from an international and an historical perspective. What we must consider is how we should try to reduce the risk of finding ourselves in the same situation as many others. In this sense, the situation here is slightly more urgent and sensitive. Norway and Canada, for instance, are in a similar situation. Macroprudential policy – but the policy rate also has a role The main line in the international discussion is that financial imbalances should primarily be prevented through measures within the new policy area known as macroprudential policy. But as I said before, this does not mean that the policy rate has been removed from the agenda.
It therefore represents an enormous potential market that remains yet untapped. Takaful operators assume an important role as economic or financial agents as they essentially mobilise long-term funds in the form of contributions and invest them in the available Islamic investment avenues. As custodians of public funds, takaful operators must ensure that the takaful funds are invested in compliance with Shariah and are soundly managed to instil public confidence. For the takaful industry to be developed into a viable alternative to the more entrenched conventional insurance industry, the need for it to be supported by the core components of a comprehensive Islamic financial system cannot be over-emphasised. As takaful operators are both mobilizers of long-term funds and fund managers to the policy holders, their ability to generate returns to fulfil the obligation to the policy holders depends very much on the range of financial instruments available in the market place. Without an effective financial system, takaful operators may not be able to perform as effectively and as efficiently in terms of delivering their promise on the profit sharing basis and to be able to keep pace with their conventional counterparts in the area of fund performance. In the absence of a viable Islamic capital market, there would not be an adequate supply of quality financial instruments for which the takaful funds can invest. It may have to depend on low yielding returns from bank deposits.