Governors of OIC Central Banks Recommend Role of Islamic Finance in Promoting Growth and a Diversified Financial Sector

The Meeting of Central Banks and Monetary Authorities of the Organisation of Islamic Cooperation (OIC) Member Countries was held at Sasana Kijang in Kuala Lumpur on 16 November 2011. The meeting, which was organised and hosted by Bank Negara Malaysia in collaboration with the Statistical, Economic and Social Research and Training Centre for Islamic Countries (SESRIC) agreed that it was important to build a diversified, progressive and inclusive financial sector including exploring the role of Islamic Finance in achieving these objectives.

Delegates were officially welcomed by the host, Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia (BNM). The proceedings included an opening address by Dr. Savas Alpay, Director General of SESRIC; a keynote address by Mr. Shaukat Aziz, former Prime Minister of Pakistan, who spoke on 'Accelerating Financial Sector Development for Economic Growth: Distilling Global Lessons for OIC Member Countries'; and a panel discussion moderated by Professor Rifaat Abdel Karim, former Secretary General of the Islamic Financial Services Board (IFSB).

Dr. Martin Redrado, former Governor of the Central bank of Argentina, delivered a luncheon keynote on 'Central Banking in the 21st Century: Implications of Economic and Financial Globalisation'.

The governors emphasised in their final communiqué that emerging economies were expected to continue to contribute towards driving global economic recovery and growth, and that the potential role of Islamic finance in supporting this endeavour should be given special attention.

The governors agreed that the global financial crisis has highlighted that weaknesses in the financial sector and fiscal policies could have destabilising effects and negative consequences on the real economy. This has reinforced the importance of an effective functioning financial sector in supporting sound and sustainable economic development.

There was consensus that the financial sector has an essential role to efficiently intermediate funds towards productive economic activities and generating sustainable and balanced growth. A well developed financial sector can improve standards of living, create high value employment, and drive the economic transformation process.

The governors stressed on the importance of building strong financial institutions to serve the economy, and having the necessary financial infrastructure supported and balanced by a strong regulatory and supervisory framework, including macro and micro-prudential framework, to safeguard financial stability. The need to create an inclusive financial sector towards achieving balanced economic growth and greater shared prosperity, was also recognised.

It was acknowledged that the role of central banks in collaboration with the relevant government agencies, was crucial in facilitating a nation's developmental agenda towards achieving sustainable and non-inflationary economic growth. The governors concurred that it was imperative for central banks to continuously undertake transformation and modernisation in enhancing organisational capacity and governance to effectively perform their mandate. Towards this end, the governors reaffirmed their commitment to strengthen collaboration by leveraging on their individual strengths and cooperating in building their capacities.

The 2012 Meeting of Central Banks and Monetary Authorities of the OIC Member Countries will be hosted by the Central Bank of the Republic of Turkey, and the Saudi Arabian Monetary Agency and Bank Indonesia will be the hosts in 2013 and 2014, respectively.