ARTIFICIAL INTELLIGENCE IN ISLAMIC FINANCIAL INSTITUTIONS: TOWARDS ENHANCED SHARIA COMPLIANCE

Abstract

Abstract

Artificial Intelligence (AI) is increasingly positioned as a transformative enabler of Sharia compliance in Islamic Financial Institutions (IFIs), promising real-time monitoring, improved auditing accuracy, and richer decision-support capabilities. Yet its adoption raises substantive ethical, governance, and interpretive challenges that remain underexplored in the literature. This study addresses that gap through a systematic literature review (SLR) of 47 peer-reviewed publications and regulatory documents (2016–2024), retrieved from Scopus, Web of Science, ScienceDirect, Emerald Insight, and EBSCO. The review applies a five-theme coding framework, validated through independent dual-coding with substantial inter-coder agreement (Cohen's κ = 0.84). Findings are interpreted through an integrated theoretical lens combining the higher objectives of Islamic law (Maqasid al-Shariah) with the Technology-Organization-Environment (TOE) framework, anchoring the analysis in both Islamic ethics and established adoption theory. A comparative case analysis of four pioneering IFIs (Wahed Invest, Dubai Islamic Bank, CIMB Islamic Bank, and Emirates Islamic Bank) illustrates how strengths and weaknesses materialise in practice. A SWOT synthesis distils strategic implications. The study contributes a principle-based conceptual model linking Explainable AI (XAI), Sharia-centric data governance, and human-in-the-loop oversight to the Islamic objectives of preservation of wealth, justice, and public welfare. The principal contribution is to move the AI–Sharia debate from generic claims toward a testable, ethically grounded framework that can guide regulators, IFI boards, and Sharia Supervisory Boards.

Keywords: Artificial Intelligence; Sharia Compliance; Islamic Finance; Maqasid al-Shariah; Explainable AI; Ethical Governance; FinTech