How Islamic finance can bridge tradition and tomorrow

Discover what bankers, scholars and regulators had to say about the future of Islamic finance at Global Shariah Majlis 2025 – from tokenisation to Tawarruq.

21 November 2025

9 mins

Corporate & investment bankingCorporatesFinancial institutions and investor groups

The Islamic finance market is projected to exceed USD7.5 trillion in assets by the end of 2028, underscoring its strong growth and rising global importance. Its success poses challenges, such as aligning financial practice and innovation with Maqasid al-Shariah’s ethical principles.

Standard Chartered’s annual Global Shariah Majlis 2025 gathered Islamic bankers, scholars and regulators in Kuala Lumpur to discuss these issues under the theme of ‘Bridging tradition and tomorrow – Faith, Finance and Future’. The event highlighted several key insights shaping the next chapter of Islamic finance.

Tawarruq at a crossroads: reform, regulation or replacement?

Among Shariah contracts, Tawarruq has become the most commonly used, especially for cash and liquidity management. While critical to driving growth, Islamic banking has become over-reliant on Tawarruq for non-cash finance, largely thanks to its simplicity.

The poll below was used to kickstart the conversation and reflects participants’ views on what the next strategic step for the use of Tawarruq in Islamic finance should be.

A panel on the future of Tawarruq agreed on the need for diversification and greater use of other Shariah contracts. However, efforts to diversify will need to consider Tawarruq’s popularity and market dominance and the lack of Shariah-compliant alternatives in some jurisdictions.

“Generally, we need Tawarruq in three specific areas,” Dr. Mufti Irshad Ahmad Aijaz, Member Shariah Board, Standard Chartered Bank Pakistan, explained. “Firstly, where there is a need for cash, especially in consumer banking, personal finance and credit cards. We also need it in treasury products, where no alternative is available, especially for risk management and as an alternative to derivatives. And the third area is the conversion of existing assets.”

Prof. Dato’ Dr. Ashraf Md Hashim, Internal Shariah Supervision Committee Member at Standard Chartered Bank UAE, suggested that stakeholders needed to collaborate on diversification and create pilot projects for alternative finance products.

Focusing on process reform, Dr. Ahcene Lahsasna, Chairman of the Shariah Committee at Standard Chartered Saadiq Berhad Malaysia and the Internal Shariah Supervision Committee at Standard Chartered Bank UAE, emphasised the benefits of fintech – particularly smart contracts – for reforming Tawarruq and addressing existing operational gaps.

A central challenge in Tawarruq administration is human error which arises from manual processes and can risk non-compliance with Shariah rules. Automation – and using blockchain-based smart contracts and tokenisation – can improve efficiency and management, Lahsasna said.

Dr. Sheikh Nizam Yaquby, Chairman of the Global Shariah Supervisory Committee at Standard Chartered and Chair of the Shariah Board at Standard Chartered Pakistan,agreed on the need for digital platforms. However, he also advocated for expanding the scope of suitable commodities for Tawarruq, which remain limited.

“So long as there is a need in the communities to have cash in your hand, Tawarruq will remain a very important contract to fulfil that need,” he said. “The best thing is to diversify the commodities and have a digital platform that offers many choices to encourage trade through Tawarruq.”

Crypto, tokenisation and the Maqasid al-Shariah: aligning innovation with ethics

Digital assets like stablecoins, non-fungible tokens and cryptocurrencies are now part of the financial mainstream, Dr. Mufti Yousuf Sultan, Shariah Board Member for Standard Chartered Saadiq Berhad Malaysia, told delegates while introducing a panel on aligning digital innovation with Shariah ethics.

The discussion was started off with a poll – where participants voiced  a strong preference for banks to prioritise tokenised sukuk for treasury or liquidity management. Yet, across all use cases, regulators have responded with different licensing frameworks and policies to govern them, underscoring the difficulties in making digital assets Shariah-compliant.

Dr. Ahmad Lutfi Abdul Razak, Syariah Advisory Body Member of Standard Chartered Securities (B) Sdn Bhd, Brunei, described the challenge Shariah boards face:

“Any technological innovation – whether it is tokenisation, stable coins or crypto – must ultimately serve the high objectives of the Shariah and not undermine them.”

“We need to ensure that Shariah compliance is built into the design and not just reviewed at the end as an afterthought,” he added, pointing to the need for clear documentation, enforceable token holder rights and transparent auditing of the underlying assets.

Although these digital innovations need to be properly explored through pilot projects, Dr. Mohamed Ali Elgari, a member of Standard Chartered’s Global Shariah Supervisory Committee, was clear on their transformative potential.

One key benefit would be potentially making Sukuk available more inclusively: “Sukuk is a very lucrative part of the available investment opportunities, but it is beyond the average person. The smallest Sukuk is almost USD50,000. But with tokenisation, it is possible, even a saver who has USD100 can participate. And this is huge in terms of the inclusion that is going to result from it,” he said.

Another challenge to overcome in this context is classifying digital assets under Shariah, as Prof. Dato’ Dr. Aznan, a Global Shariah Supervisory Committee Member at Standard Chartered, explained. He said digital assets are usually ‘items’ rather than currencies, and their nature, purpose and how they are traded determine the status of Shariah compliance.

As digital assets continue to grow, both Prof. Dato’ Dr. Aznan and Dr. Elgari stressed the importance of central banks and Shariah boards in pragmatically facilitating innovation and laying clear ground rules for compliance.

Meeting client needs responsibly: Shariah approaches to structured solutions

A panel on Shariah approaches to structured solutions discussed how demand for Islamic investments far exceeds available Shariah-compliant assets, creating a need for more diversification and global investment access.

Prof. Dr. Zurina Shafii – Shariah Committee Member for Standard Chartered Saadiq Berhad Malaysia – highlighted the challenge for institutional investors, like pension funds, in finding suitable fixed-income options to preserve their capital for beneficiaries. She noted that the sukuk market isn’t large enough and other Shariah-compliant structured products are needed that emulate fixed returns. She warned that a lack of alternatives might lead to investments in non-compliant products.

Prof. Dato’ Dr. Aznan agreed, warning against the camouflaging of conventional finance instruments as Islamic and emphasised the need to avoid investments with returns from non-compliant activities. The risk of this happening was particularly high when investing in Western countries, where Shariah rules are often difficult to incorporate into contracts, he added.

What’s more, even if an investment is considered Shariah-compliant at the outset, anticipating what will happen to it further down the line can be very complex, as Dr. Elgari warned.

One solution to the dilemma could be a tightening of the screening criteria applied to Islamic investments, suggested Mufti Muhammad Abdul Mubeen, Group Head of Shariah at Standard Chartered Pakistan and a member of the Shariah Committee at Standard Chartered Saadiq Berhad Malaysia and Pakistan.

Dr. Mubeen advocated a “global plus local” approach to setting such screening standards.

“Global standards give cross-border investments flexibility and confidence to investors. But we have to keep in mind the local context: the legal environment, tax implementation, flexibility of interpretation in the different school of thoughts and accommodation of local customs (Urf), public interest (Maslahah), and necessity (Darurah).

Shared resolve and collaborative approaches

The discussions at the Global Shariah Majlis 2025 underlined that sustainable growth in Islamic finance hinges on keeping innovation aligned with Maqasid al-Shariah. This calls for collaboration among scholars, regulators and technologists to revisit standards to seize new opportunities and drive diversification. Doing so will ensure resilience, growth and global relevance for Islamic finance amid a fast-changing financial landscape.

You may watch the full panel discussions here:

• Panel 1: Tawarruq at Crossroads: Reform, Regulation, or Replacement?
• Panel 2: Crypto, Tokenisation, and the Maqasid al-Shariah: Aligning Innovation with Ethics
• Panel 3:  Meeting Client Needs Responsibly: Shariah Approaches to Structured Solutions