This study examines the opportunities and challenges presented by the incorporation of artificial intelligence (AI) technology into the Islamic finance industry. In terms of research methods, literature review and conceptual analysis are employed. The results indicate that the incorporation of AI technology into Islamic finance and presents both significant opportunities and obstacles that must be surmounted. Among these obstacles are adherence to Islamic law, ethical concerns, risk mitigation, and the possibility of bias in decision-making. The contribution of this study is to cover a gap in the literature regarding the incorporation of AI technology in Islamic finance and to provide practitioners, policymakers, and academics with valuable insights. The findings of this study could aid them in investigating the potential of AI technology in Islamic finance and formulating solutions to overcome the obstacles associated with AI adoption. In addition, this research has the potential to contribute to a larger body of literature on the general application of AI in finance.
Top1. Introduction
Rapidly transforming the financial sector, artificial intelligence (AI) is also having an impact on the Islamic finance industry. Integration of AI technology into Islamic finance presents the industry with both opportunities and challenges(Flavián et al., 2022; Hentzen et al., 2022; Lee & Chen, 2022). AI has the potential to revolutionize Islamic finance by increasing efficiency, decreasing costs, enhancing risk management, and facilitating personalized services. Concerns exist, however, regarding the ethical ramifications of AI adoption, job shifts, and potential bias in decision-making(James, 2021; Naqvi, 2021; Swain & Gochhait, 2022). As a consequence of the incorporation of AI technology into Islamic finance, there are concerns about the ethical implications of AI adoption, job shifts, potential bias in decision-making, and data privacy and security. Algorithms utilizing artificial intelligence can lead to the development of financial products that violate Islamic law or engage in illicit behavior. The implementation of AI technology can lead to employment losses and increase the likelihood of irrational decision making. Due to the fact that Islamic financial institutions collect and process sensitive personal and financial data, there may also be data privacy and security concerns. It is imperative that Islamic financial institutions resolve these issues and ensure that the integration of AI technology is conducted ethically and responsibly, in accordance with Islamic law, and in a manner that protects the interests of all stakeholders.
Islamic finance is a rapidly expanding industry based on Islamic law, which prohibits interest-based transactions and promotes risk-sharing and socially responsible investing(James, 2021; Naqvi, 2021; Swain & Gochhait, 2022). Integration of AI technology into Islamic finance presents both opportunities and challenges for the industry, and the full extent of AI adoption's potential impact is not yet known.
This paper endeavors to investigate how AI technology can be utilized to revolutionize the Islamic finance industry by enhancing operational efficiency, customer experience, risk management, and decision accuracy. The topic also addresses challenges associated with AI adoption in Islamic finance, such as the need to ensure compliance with Islamic law, address ethical concerns, and mitigate potential risks; it explores the opportunities and challenges of AI adoption in Islamic finance; and it provides insight into how Islamic financial institutions can address these challenges while maximizing the potential benefits of AI technology.
Integration of AI technology into Islamic finance is a comparatively recent occurrence, and its potential impact on the industry is not yet fully understood. As a result, it is necessary to investigate the opportunities and obstacles created by the implementation of AI in Islamic finance. The current state of artificial intelligence research in Islamic finance is restricted, and empirical studies on the subject are scarce. This research gap presents an opportunity for academics to contribute to the corpus of knowledge by investigating the potential benefits and risks associated with artificial intelligence's adoption in Islamic finance.
The significance of the study lies in the fact that it addresses a lacuna in the literature regarding the incorporation of AI technology in Islamic finance. Examining the potential opportunities and challenges of AI adoption in the industry, this topic provides insight into how Islamic financial institutions can overcome these obstacles while maximizing the potential benefits of AI technology. This topic may be beneficial to practitioners, policymakers, and academics in the Islamic finance industry who are interested in exploring the potential of AI technology in their field, and it may contribute to a larger body of literature on AI in finance.