Artificial Intelligence in Islamic Finance: Applications, Financial Inclusion, and Shari'ah Governance

Abstract

The integration of artificial intelligence (AI) into Islamic finance has moved from a speculative topic to an active area of regulatory and academic concern, yet the literature remains fragmented across legal, bibliometric, and applied technical strands. This review synthesises twenty-two peer-reviewed studies published between 2018 and 2026 to answer three questions: where AI is being applied across the Islamic finance value chain, whether AI adoption advances financial inclusion in developing and Muslim-majority economies, and what governance safeguards the literature proposes for keeping AI-enabled decisions within the bounds of Shari'ah. The review finds consistent evidence that AI is already embedded in front-office functions such as credit scoring and Takaful underwriting, middle-office functions such as antimoney laundering and know-your-customer screening, and back-office functions such as Sukuk portfolio optimisation and regulatory technology compliance. Cross-country econometric evidence links AI adoption to gains in financial inclusion, though the relationship is uneven across income groups, and emerging applications in zakat and waqf administration extend this potential into Islamic social finance specifically. The governance literature converges on a shared concern: the absence of legal frameworks and Shari'ah board technical capacity to audit algorithmic decisions for transparency, fairness, and alignment with maqasid al-shari'ah, a concern that mirrors, and in some respects sharpens, the wider evidence on algorithmic bias in conventional credit scoring. The review closes by considering what these findings imply for Islamic financial institutions operating in Somalia and the wider Horn of Africa, and by identifying gaps, principally the scarcity of empirical, sub-Saharan African evidence, that future research should address.