The moveable feast that is Palestinian cinema returns to Britain next week for the latest London Palestine Film Festival. Launched in 1998, the festival hub will once again be the towering concrete battlements of the Barbican Arts Centre, with satellite events scattered across the capital's cinemas and colleges. The 2012 programme features more than 50 works including dramas, documentaries, shorts, video art installations and rare gems from the archives - plus a topical new strand called "Beyond Palestine" focusing on Syria and the western Sahara. Panel discussions, lectures and educational school screenings are also part of the schedule.

Two of the festival's most prestigious screenings are Tawfik Abu Wael's Last Days in Jerusalem, a claustrophobic drama about a troubled east Jerusalem couple weighing up their imminent relocation to Paris, and Sameh Zoabi's Man Without a Cell Phone, a deceptively cheery comedy about the everyday humiliations of Palestinian-Israelis living on the other side of the barrier. Although neither film is overtly political, each director insists the context will be clear to Palestinian viewers. Both are stories of exile, occupation, checkpoints, border walls and divided identities.

"Actually, for me, the film is very political," says Zoabi. "For me, it's a film that calls for awakening, a revolution in a way. But you can do it in a humorous way, in a universal way. I showed my film in Ramallah in the West Bank and people were surprised in a good way; they didn't think from such a hard reality you can find a voice for humour but still have a message that is very positive."

Dormant for decades after the establishment of Israel in 1948, Palestinian cinema finally began to establish a strong voice again in the past 20 years, thanks to globally acclaimed films such as Elia Suleiman's 2002 prize-winner Divine Intervention and Hany Abu Assad's controversial 2005 Oscar contender about suicide bombers, Paradise Now. Films such as these are only made possible by funding and support from outside countries, since Palestine itself still has no film schools, no studios and virtually no film-industry infrastructure.

The London Palestine Film Festival, in tandem with similar events across Europe and the US, has helped give a platform to this fledgling cinematic nation. Ironically, the festival also means that Londoners have greater access to Palestinian films than most actual Palestinians. But for Abu Wael, this lack of a home-grown industry has its liberating side.

"Palestinians don't see Palestinian films because they don't have cinemas and they have miserable lives, usually," he admits. "They don't care about cinema, so Palestinian filmmakers make films in the name of the Palestinians for the world - this is problematic, but on the other side it gives the Palestinian directors huge freedom because you know you don't have a market. The truth is, nobody cares if your film is successful or not successful. Usually it's public money, not private money, so a Palestinian director has great freedom to make whatever he wants. This, for me, is what is beautiful about Palestinian cinema. Every director has his own style, his own vision."

In a further irony, most of the prominent Palestinian features of the past two decades, including Man Without a Cell Phone and Last Days in Jerusalem, have been partly funded with Israeli government money - which raises the question why such an image-sensitive country would agree to finance films that effectively depict Israelis as racist villains?

"It's very simple," laughs Zoabi. "Nobody from the government reads the script! Fortunately, they have a committee of filmmakers and most of them are very liberal and interested in different voices. But if my film had gone straight to the government, I'm sure I would not get funding."

Of course, this creative and financial trade-off is fraught with problems, opening both sides up to charges of collaborating with the enemy. At a pre-festival screening of Last Days in Jerusalem in London last week, some audience members challenged Abu Wael for concentrating on the domestic problems of Palestinians with Israeli passports while ignoring the broader political struggle of his people. Speaking after the screening, the director shrugs off these charges.

"Every film is political," he nods. "But is a cliché political? Until now I made two feature films, I faced the same problem for raising money and selling the film: what's Palestinian about it? Why this question? Because they expect something, because people only know Palestinians through the news, they know them in only a very simplistic way. I don't say all Palestinians should make the same film, but for me not all Palestinian directors should be fighters, they should be directors. When Ken Loach tries to raise money for his film, nobody asks him: what's British about it?"

Claiming inspiration from classic European maestros such as Michelangelo Antonioni and Jean-Luc Godard, as well as from the modern Palestinian masters Michel Khleifi and Rashid Masharawi, Abu Wael makes the case for a more sophisticated kind of Palestinian cinema: emotionally mature, politically nuanced and capable of self-criticism.

"Maybe my film is not a typical Palestinian film," he shrugs. "But nobody can tell the Palestinian director what to do and what not to do. You are now in the war, you are in the struggle, you aren't complex? For me, no, I tell you I feel freedom. I believe the Palestinian director should do whatever he wants, even if he wants to criticise his own society. I'm a Palestinian. Despite the occupation, we have a normal life, like everybody else in the world."