Zamani Abdul Ghani: Building a progressive takaful sector in the overall Islamic financial system Keynote Address by Mr Zamani Abdul Ghani, Deputy Governor of the Central Bank of Malaysia, at the 2nd Seminar on Regulation of Takaful, Langkawi, 23 February 2006. *  *  *  Bismillahirrahmanirrahim. His Excellency Dr. Bassel Hindawi Vice Chairman, Director General of the Commission Insurance Commission of Jordan Mr. Anwar Khalifa Ebrahim Al-Sadah Deputy Governor, Bahrain Monetary Agency Professor Rifaat Ahmed Abdel Karim Secretary-General, Islamic Financial Services Board Distinguished guests and participants, Assalamualaikum warahmatullahi wabarakatuh and good morning. 2. It gives me great pleasure to be here this morning to welcome you to Malaysia and to this beautiful island of Langkawi. I am also pleased to be invited by the Islamic Financial Services Board (IFSB) to address this major event that brings together those among us who share deep interest in the development of global takaful and Islamic finance. Alhamdulillah, we have among us today distinguished market players, regulators, scholars, consultants as well as participants from almost twenty (20) countries around the world. I also wish to congratulate the IFSB for its efforts in organizing, for the second consecutive year, this international seminar focusing on the regulation of takaful. Let me at the outset reiterate the importance of this Seminar as a source of collaboration for ideas, sharing of knowledge and exchange of experiences for the continuous developments and improvements of the Islamic finance industry.
The interdependence between the different components can be seen in cases where Islamic banking relies on takaful operators to provide protection and coverage for Islamic financing products offered by the Islamic banks. In the case of takaful operators, they would rely on the Islamic banks, through bancatakaful arrangement, to have automatic access to the banks' wide customer base and to leverage on the banks' reputation and prominent position to effectively distribute takaful products. The Islamic capital market will also depend on the takaful operators, and to some extent the Islamic banks, to participate in subscribing to Islamic financial instruments which fulfil the medium to long-term financing needs. In return, the adequate supply and availability of a wide range of financial instruments offered in the Islamic capital market has facilitated takaful operator to effectively manage its asset portfolio to match the liability and risk profile of the takaful fund as well as enhances the ability of takaful operator to generate attractive investment return to stakeholders. 9. Allow me now to take this opportunity to share with you Malaysia's experience in the development of the Islamic financial system that has earned Malaysia, Alhamdulillah, the recognition by the  2  BIS Review 13/2006  international financial community as a leading Islamic financial hub. In developing the Islamic financial system, Malaysia has adopted a phased-in approach which can be divided into three different phases.