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Is artificial intelligence (AI) consistent with the ethical foundations of Islamic finance? MAHMOOD SANGLAY reports on new research arguing that AI should serve the higher objectives of the Shariah rather than commercial efficiency alone.
These technologies are rapidly changing the way financial services are delivered, from approving finance applications to detecting fraud and managing investments. Artificial intelligence is no longer a futuristic concept confined to technology companies. It is becoming an integral part of modern finance, including the rapidly growing Islamic finance industry. Financial institutions are increasingly turning to AI to automate compliance, improve customer service, strengthen fraud detection and provide personalised investment advice.
A recent study, published in May 2026, by Dr Muhammad Izzul Syahmi Zulkepli, Dr Muhammad Safwan Harun, Dr Muhammad Ikhlas Rosele, Dr Suffian Haqiem Norazelan and Dr Muhammad Hazim Mohd Azhar argue that while AI offers enormous opportunities for Islamic finance, its success should not be measured solely by greater efficiency or profitability. Instead, the researchers say, every AI application should be judged according to the maqasid al-Shariah – the higher objectives of Islamic law.
Published in the Journal of Fatwa Management and Research, the paper contends that AI has the potential to strengthen transparency, justice and public welfare, provided it is governed by a robust ethical framework rooted in Islamic principles.
The researchers note that AI is already transforming financial services across the world. Islamic financial institutions have begun deploying technologies such as AI-powered customer chatbots, robo-advisers, automated Shariah compliance systems and advanced risk assessment tools. Global financial institutions are also investing heavily in AI as competition intensifies in the digital economy.
According to the study, some of the greatest benefits may be felt by ordinary consumers.
Traditional credit assessment often disadvantages people who lack formal banking records. AI can instead analyse alternative forms of data, allowing Islamic financial institutions to extend Shariah-compliant financing to individuals and communities that have historically been excluded from mainstream finance. The researchers argue that this supports financial inclusion while advancing fairness and social welfare.
The technology is also helping institutions strengthen anti-money laundering measures, improve customer verification procedures and identify suspicious financial activity more quickly than conventional manual systems. Investment platforms are using AI to help Muslim investors build diversified portfolios that comply with both Shariah principles and broader ethical investment criteria.
Beyond commercial banking, the researchers point to AI’s potential to improve the distribution of zakat and waqf by identifying beneficiaries more accurately and helping charitable organisations maximise the impact of their resources.
However, the paper stresses that these opportunities are accompanied by significant ethical risks.
Among the greatest concerns is the lack of transparency in many AI systems. Sophisticated algorithms often operate as “black boxes”, making decisions that are difficult to explain even to specialists. For Islamic finance, where accountability and justice are fundamental principles, such opacity presents a serious challenge.
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The researchers also warn that AI systems can unintentionally reproduce biases found in historical data, potentially leading to unfair lending or investment decisions. They further identify privacy risks arising from the vast quantities of personal information required to train and operate AI systems. Without proper safeguards, these weaknesses could undermine public trust and conflict with core Islamic ethical values.
Rather than rejecting AI, the authors argue that Islamic finance should embrace it within a comprehensive framework guided by the maqasid al-Shariah. These higher objectives seek to preserve religion, life, intellect, family and wealth while promoting justice and preventing harm. Technology, they contend, should therefore remain a means of serving society rather than becoming an end in itself.
The study proposes stronger Shariah governance to ensure that AI systems remain transparent, explainable and accountable throughout their lifecycle. It also calls for closer collaboration between Shariah scholars, regulators, financial institutions and AI specialists to develop ethical standards capable of keeping pace with rapidly evolving technologies.
The paper concludes that AI and Islamic finance need not exist in tension. On the contrary, when technological innovation is firmly anchored in the maqasid al-Shariah, AI can help make Islamic finance more inclusive, transparent and socially beneficial while remaining faithful to its ethical foundations.
