Islamic Fintech 2025: Contemporary Risk Management Tools

Islamic Fintech 2025: Contemporary Risk Management Tools

Question:

Assalamu alaykum warahmatullah wabarakatuh,

Good day respected Shaikh Mufti, thanks for today's insightful presentation at TAIF session.

Here are my questions to you Sir:

How could I get trained in Islamic FINTECH?

How could I invest in a less-risk Islamic FINTECH products?

As I await your response, my utmost regards to you

Thanks.

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Your question refers.

We would like to applaud you for your zeal and enthusiasm in gaining knowledge about Islamic Economics and finance.

Introduction to Shariah Compliant Fintech

Islam is a unique religion of balance, justice and equity. Islam addresses the contemporary socio-economic challenges of the world through unique shariah compliant solutions. The advent of modern financial technological advancements such as artificial intelligence (AI), embedded technologies and tokenization presents a unique opportunity for the Muslim Ummah.

For example, the adoption of Islamic neural and behavioural banking, VIZ; AI centric tool that provides "Hibah" rewards to Islamic banking clients based on specific behavioural performance such as the recitation of the Qur'an or dispensation of Zakat.

Furthermore, a credit algorithm may provide certain Ju'alah (monetary incentives) for financial brokers or business development managers under a valid shariah complaint Ju'alah contract.

An AI Legal Robot could also flag prospective Shuroot Faasidah (voidable conditions) in the underlying contractual business terms of engagement. 

Islam advocates and promotes the pursuit of Itqan and excellence.

Rasulullah صلى الله عليه وسلم has stated that “Indeed Allah SWT loves that an action be committed in perfection by anyone of you” (Sunan al-Bayhaqi in Shu‘ab al-Iman (4929)

The above Hadith clearly expounds on the importance of pursuing excellence in Islam.

According to the Merriam-Webster Dictionary, fintech is defined as “products and companies that employ newly developed digital and online technologies in the banking and financial services industries”. [1]

According to the global management consultancy firm, Mckinsey, Fintech is defined as “ Fintechs—short for financial technology—are companies that rely primarily on technology to conduct fundamental functions provided by financial services, affecting how users store, save, borrow, invest, move, pay, and protect money.” [2]

Shariah Compliant Fintech essentially refers to the “proposition of financial services backed by technology or digital platforms in new and innovative ways in a Shariah Compliant manner”.

We have identified 35 key Shariah Compliant Fintech micro-sectors such as Shariah Compliant neo-banking, Shariah Compliant embedded technologies, shariah compliant paylater schemes and Shariah Compliant tokenization. 

We understand that the global Islamic fintech market is expected to exceed 100 Billion United States Dollars in the year 2025, projected to reach 180 Billion USD by 2026.

1. Islamic Fintech Training

Your question related to Islamic Fintech training refers.

We understand that you are a post-graduate researcher in Islamic Law, Faculty of Economics, Banking and finance, based in Saudi Arabia.

We advise you to consider the following educational resources:

1. Your Brief Guide to Islamic Finance: You may download the book from https://www.shariahbusiness.com/media/downloads/Your-Guide-to-Islamic-Finance_zBX1VBn.pdf

The book in reference has 16 chapters which cover a vast array of topics including Sukuk/Islamic Bonds, Shariah Auditing and Governance, Takafol/Islamic indemnification, Shariah Risk and Liquidity Management, contemporary articles on Islamic banking/finance and a glossary of terms on Islamic Finance/banking.

2. Islamic Fintech Courses: Taif Digital Institute of Islamic Finance

 

2. Islamic Fintech Risk Management

Risk management is the process by which various risk exposures for a financial institution are identified, measured, mitigated, controlled, reported and monitored.

There are a number of unique contemporary fintech challenges and risks such as:

1. Misuse of Data  
2. Third-party risks
3. Biased algorithm decision making
4. AI Misinformation
5. Behavioural Manipulation

Shariah Law and Islamic Fiqh (Jurisprudence) provides contemporary guidance and practical solutions to modern financial challenges including contemporary fintech risk management challenges. For example, a micro-credit provider can encumber the legal asset of the borrower in a valid shariah compliant credit arrangement under the juridical conceptualization of a Rahn (collateral) or procure a credit advance against a Hawalah (assignment of a debt) to a Takafol provider in the form of a shariah compliant bill of exchange.

Rasulullah Sallallahu Alayhi Wa Sallam stated:

حَدَّثَنَا عَبْدُ رَبِّهِ بْنُ خَالِدٍ النُّمَيْرِيُّ أَبُو الْمُغَلِّسِ، حَدَّثَنَا فُضَيْلُ بْنُ سُلَيْمَانَ، حَدَّثَنَا مُوسَى بْنُ عُقْبَةَ، حَدَّثَنَا إِسْحَاقُ بْنُ يَحْيَى بْنِ الْوَلِيدِ، عَنْ عُبَادَةَ بْنِ الصَّامِتِ، أَنَّ رَسُولَ اللَّهِ صلى الله عليه وسلم قَضَى أَنْ ‏ "‏ لاَ ضَرَرَ وَلاَ ضِرَارَ ‏"‏ ‏.

Translation:“There should be no individual harm caused nor reciprocal harm.” ( Sunan Ibn Majah 2340)

We contextually infer from the above Hadith that evidential behavioural manipulation is impermissible. Moreover, an evidentially biased credit algorithm decision-making code is impermissible.

Furthermore, the Shariah Law also considers the public interest under the well-known juridical concept of Maslahah Mursalah. Financial institutions, regulators and governments are therefore advised to consider stringent ethical data governance codes to prevent third-party data-misuse such as AI misinformation.

Your specific question related to less-riskier Islamic Fintech solutions refers.

Your question is ambiguous and unclear.

Nevertheless, we understand that certain shariah compliant AI predictive neural risk management tools could enhance the risk management metrics of Islamic fintechs.

Moreover, we advise one to consider asset-backed shariah compliant fintech solutions such as tokenized real-estate Musharakah.

You are welcome to consult with Al-Mabrook for further details on tokenized asset-backed shariah compliant instruments: https://almabrook.io/

We advise you to consult with contemporary shariah scholars/Islamic Finance experts in Saudi Arabia for specific contextual shariah guidance.

You are also welcome to contact our Darul Iftaa for further assistance regarding your contextual Islamic fintech risk-management queries.

And Allah Ta’āla Knows Best

(Mufti) Ismail Desai

Shariah Board and Fatwa Committee,

Darul Iftaa, Durban, South Africa

 

DISCLAIMER: The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question.  The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage.  This answer may not be used as evidence in any court of law without prior written consent from the author.  Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.

and Allah Ta'ala Knows Best

Mufti Ismail Desai
Darul Iftaa
Durban, South Africa

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Disclaimer The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.

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