Our Key Takeaways From IFN UK Forum 2025

Two of our Islamic finance specialists Alexandra Simpson and Seyed Ahlesaadat recently attended the IFN UK Forum - Europe's longest-running Islamic finance conference.

Attendees discussed how the Islamic finance industry has grown and continues to evolve, driven by technological innovation, increasing alignment with environmental, social, and governance (ESG) principles and significant regulatory shift.

The discussions highlight an industry at a pivotal stage – balancing tradition with innovation, regulatory certainty with market dynamism and commercial growth with social impact. The convergence of technology, ESG priorities and regulatory reform suggests that the coming years will be transformative, positioning Islamic finance not only as a niche market but as a key contributor to the future of global finance.

Alexandra and Seyed summarise their key takeaways below.

Digital transformation of Islamic finance

Fintech is reshaping the Islamic financial services industry, increasing efficiency and accessibility.

• Islamic fintech growth: the global Islamic fintech sector is projected to see continued growth, leveraging technologies like AI, blockchain and automated compliance systems. These tools are streamlining Shariah compliance checks and enhancing overall operational efficiency.
  
  
• Expansion of digital offerings: this includes the rise of Islamic neobanks and other online platforms offering Shariah-compliant services. This creates both opportunities and challenges regarding data privacy, security and the enforceability of digital contracts and smart contracts.
  
  
• Blockchain and tokenisation: the use of blockchain is increasing transparency and security in transactions. There is growing exploration into the tokenisation of real-world assets for creating Shariah-compliant digital assets, which raises novel legal questions around digital asset ownership and regulation.

Growth in ESG and sustainable sukuk

The convergence of Islamic finance and sustainable investing is a major growth area, fuelled by a natural alignment between Shariah principles and ESG criteria.

• Rising ESG sukuk market: in 2025, the market for ESG sukuk is experiencing significant growth, with Fitch Ratings projecting outstanding amounts to surpass $60bn by the end of 2026. This growth is largely driven by issuers in the Gulf Cooperation Council (GCC) and South East Asia.
  
  
• Diversified investor base: sustainable sukuk attract not only Islamic investors but also a broader base of ESG-conscious investors from western markets. This expanded demand strengthens the market's funding base and resilience.
  
  
• Legal framework for sustainable finance: regulatory guidance, such as the International Capital Market Association's guidelines, is helping standardise ESG principles within Islamic finance. Legal considerations include ensuring the proceeds of such instruments are used for genuinely sustainable projects and adhering to evolving disclosure requirements.

Regulatory developments and the impact of AAOIFI Standard 62

Regulatory shifts, particularly concerning the structuring of sukuk, present significant legal and market considerations.

• Asset-backed vs. asset-based sukuk: the proposed AAOIFI Shariah Standard No. 62, which emphasises the legal transfer of underlying assets for sukuk to be considered 'asset-backed' continues to create market uncertainty. While the final form and implementation timeline are still under discussion, the move away from beneficial or synthetic ownership could fundamentally change sukuk structures.
  
  
• Impact on issuance: if implemented as proposed, the standard could cause market fragmentation, potentially altering credit ratings and appealing less to traditional fixed-income investors. This has already driven some pre-emptive market activity by issuers.
  
  
• Need for jurisdictional clarity: divergent implementation across different jurisdictions remains a key concern. Clearer communication and potential modifications to the standard are sought to mitigate disruption and ensure market readiness.

Market growth and strategic concentration

The Islamic finance industry shows resilient, albeit concentrated, growth, driven by key markets and diversification efforts.

• Strong, concentrated growth: core markets in the GCC, particularly Saudi Arabia and the UAE, continue to drive the majority of growth, supported by national economic transformation programs like Vision 2030 in Saudi Arabia where there is a concentrated effort on the implementation of sharia principles in finance.
  
  
• Expansion into emerging markets: encouragingly, Islamic finance is expanding into new territories, with strong growth rates observed in emerging markets in Africa and Central Asia.
  
  
• Product innovation for competitiveness: to compete with conventional finance, the industry is focused on simplifying product structures and leveraging technology.

Islamic social finance and financial inclusion

Islamic social finance instruments are gaining traction as tools for sustainable and inclusive economic development.

• Waqf and zakat: Waqf (endowments) and zakat (alms) are being modernised through digital platforms to improve distribution efficiency and transparency. This creates a more robust framework for poverty alleviation and social empowerment.
  
  
• Financial inclusion through fintech: the combination of Islamic finance and fintech is helping to serve previously unbanked populations, offering accessible and ethical financial services like microfinance and peer-to-peer lending.
  
  
• Legal framework for social finance: legal and regulatory frameworks for these social instruments are evolving, requiring specialist expertise to ensure compliance and maximise impact.