Similarly in Kuala Lumpur, another senior financial services regulator, Zeti Akhtar Aziz, governor of Bank Negara Malaysia, the central bank, stressed that the Islamic finance industry is set for an exciting period starting with the year 2011.

“The global sukuk issuance in the year 2010 surpassed that of the previous year by more than 20 percent. Against this positive growth, renewed confidence of investors and issuers is evident. In 2011, the sukuk issuance is projected to surpass the level recorded in 2007 when it sustained the highest level of issuances. The year 2010 also saw Malaysia’s evolution as a multi-currency sukuk origination platform with four foreign currency sukuk issuances amounting to about $3 billion,” said Zeti in a keynote speech in February 2011 in Kuala Lumpur at the launch of the Bloomberg Enhanced Islamic finance platform and the Bloomberg AIBIM Bursa Malaysia Sovereign Shariah Index (BMSSI), which was developed by the statutory Association of Islamic Banking Institutions Malaysia (AIBIM), Bursa Malaysia, the national stock exchange, and Bloomberg.

BNM and the other community members under the MIFC initiative will contribute to the new enhanced Islamic finance platform. The MIFC will have a dedicated page on the platform providing insights on Shariah, MIFC business opportunities and key developments.

“The launch of this ringgit sukuk index,” explained Zeti, “marks another significant milestone in the Malaysian Islamic financial environment as it measures the performance of ringgit-denominated Shariah-compliant government securities in addition to the benchmarking purposes. This development has been part of the continuous support by AIBIM and Bursa Malaysia to further strengthen Malaysia’s position as a leading Sukuk market in the world.”

The collaboration between AIBIM, Bursa Malaysia and Bloomberg is also expected to see a ringgit corporate sukuk index in the offing. Governor Zeti also revealed that efforts are underway between Bank Negara Malaysia and Bloomberg to broaden this initiative to develop a foreign currency sukuk index.

In further strengthening the infrastructure for the sukuk market, the Malaysian Electronic Clearing Corporation, or MyClear, a wholly-owned subsidiary of Bank Negara Malaysia that operates the country’s real time gross settlement system and securities depository system, is also undertaking an initiative to promote cross-border financial transaction that is efficient, reliable and secured.

“This initiative reflects our commitment toward financial integration in the ASEAN region and the global financial system through closer linkage with other central securities depositories, namely Euroclear and the Central Moneymarkets Unit (CMU) of the Hong Kong Monetary Authority. It is expected that other central securities depository will participate in this initiative to heighten this cross-border linkage. MyClear is thus set to be one of the key multilateral settlement platforms that will facilitate sukuk trading transactions,” said Zeti.

The implementation of this initiative, which is scheduled to be completed in the second half of 2011, offers cost-effective access for foreign investors to invest in Malaysian securities deposited with MyClear. It will also enable Malaysian investors to invest in foreign securities deposited with international and regional central securities depository institutions.

In London on Thursday, Mohd Daud Bakar, managing director, Amanie Islamic Finance Consultancy and Education, LLC, said at a seminar organized by Amanie that the Islamic finance industry is beginning to become truly global, and that Islamic investors are scaling up the ladder of sophistication, since “bricks and mortar” instruments do not appeal to high net worth investors.

Bakar, who is one of the top Shariah advisories in Islamic finance in the world, warned that Shariah compliance “can never be compromised and that transparency in the governance process must endure.” He called for the fortification of the Shariah governance organs and mechanism; the institutionalization of regular Shariah review processes; and warned that regulations must keep pace to allow for an innovative environment.

Going forward, innovation in Islamic finance is occurring through the emergence of new asset classes; the improvements on Shariah screening methodologies; and the application of innovative techniques in familiar sukuk structures.

In the fund management space, investment managers are diversifying from equities to more exotic commodities. For instance, gold funds are beginning to be quite common. However, he warned that “one has to be cautious when structuring ‘precious metal’ funds as they are classified as ‘ribawi’ items.”

On the other hand, Islamic funds based on precious stones are beginning to appear. This is not a "ribawi" item and thus carries less stringent Shariah requirements and offers a lower risk profile due to certification on the asset. Other more exotic asset classes that are in the pipeline include valuable stamps, especially in a collection where the value appreciates or depreciates according to market demand and can be audited and certified. This can also be extended to fine arts pieces in the future.

A major development for the Islamic finance industry is the commencement of operations by the Kuala Lumpur-based International Islamic Liquidity Management Corporation (IILM) on Feb. 1. The IILM, said Zeti, is due to roll out the issuance of liquidity instruments later this year, which would allow for more efficient management of financial flows across borders and thus contribute toward the efficient internationalization of Islamic finance.

The Islamic finance industry has seen significant growth over the last decade. In today’s more challenging and uncertain environment, Islamic finance has demonstrated its resilience and viability and has sustained its growth momentum. The sector’s continued expansion will depend on extensive information, which can be efficiently accessed. The seamless flow of information in the Islamic financial markets is integral to facilitate the efficient price discovery process and maintain the vibrancy of the Islamic financial industry. Data and news that transcends boundaries in real time are important for not only investors and financial institutions but also for researchers and scholars in Islamic finance. It will contribute to enhancing competitiveness and product innovation, and strengthen the international financial inter-linkages. In this respect, added Zeti, the Bloomberg Enhanced Islamic finance platform and the BMSSI would be important contributions.

The governor revealed the Malaysian economy recorded a strong growth of 7.2 percent in 2010 driven by strong domestic demand and the country’s stronger economic and financial linkages with other emerging economies. “An important part of this recovery is the strong recovery in private investment as capacity utilization increases and as the dynamic nature of our economy presents new investment opportunities in new growth areas,” she added.