Key priorities identified in the development of Islamic finance include the development of deep and liquid local currency sukuk markets, broadening the investor base, and addressing legal, regulatory, and market infrastructure gaps to support the growth of Islamic insurance and fund sectors, was the consensus reached at the 23rd Islamic Financial Services Board (IFSB) Stability Forum.
The Forum, held on 3 July in Rabat, stressed the need for targeted structural reforms to enhance the resilience and long-term stability of the Islamic financial system.
Challenges
Mr Abdellatif Jouahri, the governor of Bank Al-Maghrib, the central bank of Morocco, in his opening address at the Forum, named four key challenges that lie ahead for Islamic finance. These are:
1. Shariah compliance, which is essential not only for sector resilience but also for the continued legitimacy and survival of Islamic finance
2. Liquidity management, which remains constrained by the limited availability of Shariah-compliant instruments, their marketability, the underdevelopment of secondary markets, and low cross-border activity. It is critical to expand the range of liquidity tools — particularly sukuk
3. Sustainable finance, which can reinforce the ethical identity of Islamic finance. Since the global mobilisation around the Sustainable Development Goals (SDGs) in 2014, a $2.5tn funding gap remains for climate-related development needs. Islamic finance can play a pivotal role in bridging this gap by aligning with green finance principles and developing Islamic green financial instruments
4. Digitalisation risks, which make it imperative to enhance supervisory vigilance, governance, and proactive risk management to address emerging threats tied to FinTech and innovation.
He said, “Tackling these challenges requires reinforced international cooperation, in harmony with global standards while remaining sensitive to local specificities.”
He also said, “Given that the Middle East holds a significant share of global Islamic financial assets, any development, positive or negative ,in this region has direct repercussions on the Islamic financial industry.”
Panellists emphasised the need for forward-looking supervisory approaches that enable the early identification of vulnerabilities and building supervisory capacity, particularly in jurisdictions experiencing rapid expansion of the Islamic financial sector.
The Forum further highlighted the critical role of national authorities in market development and the effective implementation of IFSB standards, while underscoring the importance of cross-border coordination to ensure the Islamic financial system remains stable, inclusive, and responsive to future shocks.
The Forum, with the theme ‘Navigating Shallow Waters: Addressing Structural Vulnerabilities and Shoring Resilience to Future Shocks”, was held alongside the IFSB’s 2025 Annual Meetings. The Forum brought together central bank governors, senior regulators, international standard-setters and industry stakeholders to exchange policy perspectives on promoting sound growth and long-term financial stability of the Islamic financial services industry.