Artificial Intelligence Applications in Financial Markets from a Shari’ah Perspective

Basel Alshaer

 

Abstract: This article examines the incorporation of Artificial Intelligence (AI) in financial markets from the perspective of Islamic finance, highlighting the importance of compliance with Shari’ah principles. AI technology such as machine learning, robo-advisors, algorithmic trading, and credit scoring have introduced significant efficiency to traditional finance. Nonetheless, its utilization in Islamic banking necessitates adherence to Shari’ah principles that forbid riba (interest), gharar (uncertainty), and maysir (speculative activities). This article argues for strengthening the ethical dimensions of AI by delineating frameworks for the responsible integration of AI into Islamic finance, promoting financial inclusiveness, and assuring compliance with the Shari’ah principles. The examination of the use of AI in risk management, fraud detection, and portfolio management within Shari’ah-compliant frameworks reveals how AI-driven solutions might conform to Islamic norms through transparency, equity, and social responsibility. Furthermore, the analysis of ethical dilemmas presented by AI’s potential lack of transparency and inherent biases, highlights the necessity for fairness-oriented models and regulatory modifications. The article concludes that the application of AI in Islamic finance is a welcome development, provided it is governed under legal and ethical principles of Islamic finance.