Digital Finance and Artificial Intelligence: Islamic Finance Challenges and Prospects

Access to finance matters for development, especially for the microentrepreneurs. The microfinance movement is applauded for its role in helping small businesses to grow. However, experience with conventional microfinance has been mixed in terms of capital building for microentrepreneurs. There is tremendous growth in providing access to finance to the bottom of the pyramid. The use of artificial intelligence and big data has helped fast-track the process, and now more people have access to finances than ever before. While interest-based finance has encouraged some economic growth, it has tremendously overindebted the microentrepreneurs without a corresponding growth in capital. It failed to address many socio-economic issues fully and very often increased systemic instability. In contrast, Islamic finance holds the promise against these ills. Its design principles ensure stability and fairness, and its diversity of products can help increase financial inclusion. Its diversity of applications across three paralleled public, private, and voluntary sector channels can ensure a more robust and consistent impact on economic growth and development. The present chapter highlights the importance of artificial intelligence as a critical infrastructure to facilitate financial inclusion using the Islamic finance framework.