Md. Touhidul Alam Khan, PhD :
In an era where technology is reshaping industries worldwide, artificial intelligence (AI) stands out as a catalyst for profound change. While its influence on mainstream financial services is widely recognized, a more nuanced and exciting development is unfolding within Islamic finance – a specialized sector rooted in religious principles yet rapidly evolving through technological innovation.
Islamic finance, governed by the laws of Shariah, emphasizes moral and ethical standards, risk-sharing, and the prohibition of Riba (interest). Unlike conventional systems, its unique framework demands not only financial innovation but also unwavering adherence to religious doctrines. The integration of AI into this space signals a new chapter, where advanced digital tools are reengineering financial services to align with both modern efficiency and timeless faith-based principles.
Projections indicate that the global Islamic finance market could reach approximately US$7.7 trillion by 2033, more than doubling from US$3.38 trillion in 2023. This growth, driven by increasing demand in Muslim-majority regions and interest from global ethical investors, opens the door for AI to enhance operational efficiency, ensure compliance with Shariah, and deepen customer engagement. However, progress is measured; innovators tread carefully, balancing technological potential with doctrinal integrity.
A notable arena where AI’s impact is tangible is in automating Shariah compliance assessments. Traditionally, scholars and compliance officers manually evaluated whether financial products or company operations adhered to Islamic principles.
This process was labor-intensive and prone to human oversight. Now, sophisticated machine learning algorithms can rapidly analyze extensive financial data-such as balance sheets, revenue sources, and debt profiles-to flag non-compliant elements. This not only accelerates the compliance process but also increases accuracy and consistency.
For example, some financial firms have integrated AI into their Shariah screening tools, delivering real-time insights into whether stocks or financial instruments are Halal or Haram. Utilizing natural language processing and historical compliance data, these platforms empower ethically conscious investors to make better-informed decisions swiftly and independently, enhancing their confidence in Shariah-compliant investments.
AI’s role extends beyond compliance. In the realm of credit risk assessment, especially for Islamic microfinance initiatives, AI models are reshaping traditional approaches. Since interest is forbidden, Islamic financial contracts rely on equity or lease arrangements, necessitating a deeper understanding of borrowers’ business models and cash flows.
AI-driven models use data points like mobile usage, social media activity, and utility payments-carefully selected to respect Shariah principles-to assess creditworthiness, fostering inclusion for entrepreneurs and communities often excluded from conventional banking.
Startups in countries like Indonesia and Malaysia leverage AI to evaluate the credit potential of small businesses and individuals lacking formal credit histories. This approach aligns with Islamic values of social justice and equitable opportunity, demonstrating that financial innovation can serve both technology and tradition simultaneously.
Customer service, often considered a secondary focus, has also benefitted significantly. Intelligent chatbots with advanced natural language understanding now provide immediate, contextually accurate assistance for Islamic banking customers.
From Zakat calculations to product inquiries, these virtual assistants are trained on Islamic jurisprudential content, ensuring guidance that respects religious sensitivities. Notable institutions like Emirates Islamic Bank in the UAE and financial regulators in Malaysia are leading the way, demonstrating that AI can foster trust through prompt, compliant, and customer-centric service.
Despite these promising advancements, challenges remain. The diversity of Islamic jurisprudence-spanning different schools of thought-complicates AI deployment. Variations in interpretative stances on financial structures mean AI systems must be adaptable, transparent, and capable of accommodating differing jurisprudential views. This complexity underscores the necessity for ongoing dialogue between technologists, scholars, and regulators.
Ethical considerations also come to the forefront. As AI systems handle sensitive data and influence critical financial decisions, safeguarding privacy, preventing bias, and ensuring fairness are paramount. The Islamic ethical framework underscores principles of justice, transparency, and respect for individual rights. Countries like Saudi Arabia, Malaysia, and the UAE are actively developing guidelines to ensure AI’s deployment aligns with these values, fostering responsible innovation.
Looking ahead, the synergy between AI and emerging technologies such as blockchain promises exciting prospects for Islamic finance. Smart contracts, powered by AI and executed on Shariah-compliant blockchain platforms, could automate complex transactions like Ijarah and Murabahah, embedding compliance checks into the process. Additionally, IoT devices might verify real-time delivery or ownership transfer, ensuring contract validity and transparency.
Moreover, decentralized finance (DeFi) platforms tailored for Islamic principles are beginning to emerge. AI plays an instrumental role in managing governance, liquidity, and compliance, opening new pathways for Halal investment opportunities. Projects like Caizcoin and Marhaba DeFi exemplify how cutting-edge technology and faith-based ethics can converge to create innovative financial ecosystems.
The future also demands investment in human capital. As AI reshapes Islamic finance, educational institutions and industry players are prioritizing training programs to cultivate a new generation of scholars, analysts, and technologists versed in both Fiqh and frontier technologies. This interdisciplinary approach is essential to navigate the complexities and ensure that technological innovations serve the core ethical and spiritual values of Islamic finance. Building this bridge between tradition and innovation will be critical to fostering a sustainable, inclusive, and ethically aligned financial sector.
In conclusion, the integration of AI into Islamic finance heralds a transformative era that holds immense promise. It offers the potential to enhance efficiency, improve transparency, and broaden access to financial services-all while remaining true to the ethical foundations that underpin Islamic economic principles. As Muslim populations around the globe continue to grow and seek compliant financial solutions-particularly among the younger, more tech-savvy demographic-AI provides a powerful tool to meet these evolving needs.
However, realizing this potential requires careful navigation of jurisprudential diversity, ethical considerations, and technological challenges. Balancing innovation with the integrity of Islamic principles will determine whether AI can truly serve as a force for good within this specialized sector. For stakeholders committed to both progress and faith, the path forward is clear: harness AI’s capabilities wisely, respect its limits, and ensure that the future of Islamic finance remains rooted in justice, transparency, and spiritual adherence.
In doing so, Islamic finance can not only modernize and expand but also reaffirm its core values in an increasingly digital world – creating a model of ethical, innovative, and inclusive finance for generations to come.
(The writer is the Managing Director & CEO of NRBC Bank PLC and fellow cost & management accountant from Institute of Cost & Management Accountants of Bangladesh (ICMAB). He is also the first certified sustainability reporting assurer
(CSRA) in Bangladesh).
