The Bahrain-based International Islamic Financial Market (IIFM) has also endorsed the Sukuk in September 2003. The Labuan Financial Exchange has signed an MOU with IIFM to establish a framework for greater co-operation and to pave the way for both organizations to jointly develop an Islamic Capital Market with greater global reach. The importance to innovate and develop appropriate risk management tools is clear. There are unique challenges to manage in developing derivative products for Islamic banking and finance because the end product must not only be Syariah compliant, in form and substance but also be globally attractive to all customers. While Islam encourages risk management in financial transactions, the tools or instruments used in such management must not have the prohibited elements of riba (interest or usury), gharar (uncertainty) and maysir (gambling). Certain basic Islamic financial products already exist that offer the benefits of hedging. The Bai’ as-Salam contract, for instance, is essentially a forward contract where two parties agree to carry out a sale/purchase of an underlying asset at a pre-determined future date, but at a price negotiated and fully paid today. The Istisna contract is an example of a futures contract where a buyer contracts with a manufacturer to manufacture a product at a future date. A more interesting example is the Istijrar contract, introduced in Pakistan, which includes the characteristics of a put and call option, allowing the buyer to cap the purchase price, and the seller to set a floor for the selling price.
The efforts are in progress at the international level to build the institutional, legal and humanitarian infrastructures of the globalization that we are de-facto living during the last 20 years. The Muslim World had the experience of building and maintaining a global order that embraced diversity and harmony over the regions spreading from Atlantic to Pacific and Central Asia to Central Africa from early 9th century till the end of 17th century where not only Muslims but also all members of the humanity experienced economic, social and political integration at a global scale and, unlike the turmoil and turbulence in the rest of the world, free trade and free movement of people prevailed without any discrimination against ethnic and religious identities. As member countries of the Standing Committee for Economic and Commercial Cooperation of the Organization of the Islamic Conference (COMCEC), our goal is to make a meaningful contribution to the idea of building a sustainable and stable global order to reach peace and prosperity that embraces differences between the civilizations as a source of richness and not a reason for clash, on the principles of justice, equity, participation and freedom for the humanity. The agreements we reach today will constitute the building blocks of our inspiration. Distinguished Guests, Since the last quarter of 2008, the impact of the global financial crisis on the world economies surfaced quite rapidly and destructively. The deterioration in risk perceptions destroyed banks’ appetite to extend credit to the real sector.