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This particular report (see reference link) has been published very recently (April of this year) and is a joint collaboration between the ISFB, IRTI and the IDB. We felt a desire to further scrutinize this study since it seems that not enough attention has been given to its findings. Even their own press release failed to include a link to the actual report and almost every media outlet (in particular those that claim to be internet savvy) could not - or would not - bother to include a simple hyperlink to the online document. In any case, the output can be easily described with one word: lucid. It provides a concise, refreshing and pragmatic overview of the Islamic financial industry today and provides poignant signals as to its future.

The report itself is in fact the amalgamation of work performed by three different task forces that worked on the following areas:

1. Appreciating the Islamic Finance Model
2. The State of Islamic Financial Services Industry
3. Challenges and Strategies for Strengthening Financial Stability in the Islamic Financial System

Essential Features of Islamic Finance

Source: IFSB, IRTI, IDB Report

All three sections deserve attention, for instance the attached graph from the first area (Appreciating the Islamic Finance Model) provides a succinct overview of Islamic finance. Nevertheless, it is the third area (Challenges and Strategies for Strengthening Financial Stability in the Islamic Financial System) that provides very useful indicators in terms of governance. The report takes a predominantly forward looking perspective and it identifies three key areas of priority that warrant greater attention from policy makers and regulators, so as to strengthen and enhance the "Islamic finance ecosystem":

1. Strengthening the infrastructural building blocks of the Islamic financial services industry to further enhance the industry's resilience. The report identifies a set of 8 building blocks required for strengthening industry infrastructure., and this incorporates a strong governance approach that is closely aligned with the efforts of the IFSB:
   1. Comprehensive set of cross-sectoral prudential standards
   2. Development of a liquidity management infrastructure
   3. Strengthening financial safety nets
   4. Effective crisis management and resolution framework
   5. Accounting auditing & disclosure standards
   6. Macro-prudential surveillance
   7. Strengthening rating processes
   8. Capacity building and talent development
2. Accelerating the effective implementation of Shari'ah and prudential standards and rules to facilitate the creation of a more stable, efficient and internationally integrated Islamic financial services industry. Here the report zooms in on the need for:
   1. a better implementation of prudential standards (i.e. IFSB guidelines, etc);
   2. encouraging mutual understanding of Shari'ah views on key issues across different jurisdictions (i.e. communication) ; and
   3. emphasis for Islamic finance to be a more inclusive system (i.e. integration).
   The main takeaway is that there is a clear understanding that industry cohesion is necessary and this can occur despite the various schools of thought and the different stages of market maturity.
3. Creating a common platform for the regulators of the Islamic financial services industry to enhance constructive dialogue. The most significant recommendation put forward by the report is for the establishment of a platform for constructive dialogue which is termed the "Islamic Financial Stability Forum" (IFSF). This is expected to take the form of a task force within the IFSB that will be "a strategic platform for conducive and constructive dialogue among the regulators of the international Islamic financial system". While this will be a significant undertaking it would benefit from having the input of practitioners and active market participants as well (some represented within the IFSB membership).

The overall recommendations are focused on macroeconomic issues, policy concerns, as well as crisis management. Nevertheless, it also suggests that increased attention will be given to "issues of coherence and convergence, and on opportunities to increase the efficiency, integrity and stability of Islamic financial markets". If these can be developed within an aggressive timeframe and if they have the implicit buy-in of IFSB members (regulatory bodies in particular) then we are looking at a governance initiative that could have far reaching consequences for the industry.

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