DFSA Proposes Updates to Islamic Finance Rules in DIFC
The Dubai Financial Services Authority (DFSA) has proposed changes to its Islamic finance regulatory framework in the Dubai International Financial Centre (DIFC), with the aim of clarifying endorsement requirements and strengthening consumer protection for Takaful products.
In Consultation Paper No. 172, the regulator outlined clearer criteria for determining when authorised firms or market institutions are considered to be “holding themselves out” as conducting Islamic financial business. The proposed guidance is designed to provide greater certainty for firms operating in or around Shari’a-compliant financial services.
According to the DFSA, this definition may apply where firms describe their operations, funds or products as Shari’a-compliant, offer services linked to Islamic products, or manage Islamic or Shari’a-compliant funds. The proposed updates are intended to make the rules more precise for institutions seeking to operate within the DIFC’s Islamic finance ecosystem.
At the same time, the DFSA said firms that only distribute or provide access to Islamic financial products would not need an Islamic endorsement, as long as they do not present those products or services as Shari’a-compliant and continue to meet existing client protection requirements.
The consultation also includes enhanced disclosure obligations for Takaful, the Shari’a-compliant mutual insurance model. Under the proposed framework, firms offering Takaful products would be required to disclose key contract features, fee structures, surplus-sharing arrangements and any potential additional contributions. These disclosures would apply regardless of whether the firm holds an Islamic endorsement.
The DFSA emphasised that it operates as a Shari’a systems regulator rather than a body that assesses the religious compliance of financial products. Instead, its role is to ensure that authorised firms have appropriate systems and controls in place to manage Islamic financial risks.
Charlotte Robins, Managing Director of Policy and Legal at the DFSA, said the regulator wants to provide clarity and certainty as Islamic finance continues to expand across the DIFC, the UAE and global markets.
“As the Islamic finance sector continues its strong growth trajectory within DIFC, the UAE, and globally, we want to ensure that our regulatory framework provides the clarity and certainty that firms need to operate confidently,” Robins said.
Industry Analysis
The proposed changes suggest a broader regulatory focus on consistency and transparency in Islamic finance. By clarifying when endorsement is required, the DFSA may help reduce uncertainty for firms entering or expanding within the DIFC market. The revised Takaful disclosure requirements also point to a stronger emphasis on consumer information, which could support trust in Shari’a-compliant financial products.
For financial institutions, the consultation may require a review of product marketing, customer communications and internal compliance processes. If implemented, the updates could help align the DIFC’s Islamic finance framework more closely with the sector’s growth while reinforcing its regulatory standards.
