By Yazkhiruni Yahya
Artificial Intelligence is changing the landscape of global finance by bringing greater accuracy, speed, and reliability to financial reporting. International financial research indicates that Artificial Intelligence has the potential to increase efficiency in financial operations by more than 20 percent through automation, real-time analytics, and improved internal control systems. This shows that Artificial Intelligence is becoming an essential part of modern financial management rather than a mere technological trend.
The integration of Artificial Intelligence (AI) into financial reporting processes presents significant opportunities for enhancing both operational efficiency and ethical accountability within Islamic institutions. The Qur’an and Sunnah serve as the principal sources of ethical and legal direction for all human activities, encompassing technological innovation. The Qur’an specifically opposes exploitative methods in business dealings, including ribā (usury), maysir (gambling), and gharar (extreme uncertainty). For example, the phrase “Allah has permitted trade and has prohibited usury” (Qur’an 2:275).
Therefore, rooted in the values of the Shariah, Islamic financial systems emphasize transparency, justice, trustworthiness, and excellence. When deployed responsibly, AI technologies can reinforce these principles, thereby strengthening institutional integrity and societal trust. By automating financial reporting, improving audit trails, and reducing human error, AI not only enhances internal governance but also aligns financial practices with the moral and ethical imperatives outlined in the Quran and Sunnah. These strengths help Islamic institutions maintain integrity while serving stakeholders with confidence and reliability.
Transparency (al-Tashfiyah) is one of the core Islamic values, especially in financial dealings. The Quran warns against concealing information and underscores the necessity of clear documentation: “And do not conceal testimony, for whoever conceals it, his heart is indeed sinful” (Quran 2:283). In this context, AI technologies can significantly advance transparency by producing standardized, real-time reports that are traceable and auditable. Through consistent logging and process documentation, institutions can cultivate a culture of openness and accountability, strengthening the trust of regulators, donors, and beneficiaries which is an essential requirement in Islamic finance where legitimacy and credibility are paramount.
However, meaningful transparency goes beyond technical reporting. It requires AI systems to be explainable, disclosing how decisions are made, the datasets employed, and their potential societal implications. Accountability requires strong governance to ensure that those who design and use Artificial Intelligence are responsible for its ethical and social impact. When transparency and accountability work together, Artificial Intelligence remains aligned with Islamic values and strengthens, rather than threatens, the integrity of financial practice.
The next key value is justice, or ‘Adl, a core principle in Islam reinforced by the Qur’anic call to stand firmly for fairness. In financial management, Artificial Intelligence can help uphold this value when it is designed ethically. By reducing human bias and improving the accuracy of financial data, it can support fairer decisions, including in areas such as zakat distribution and waqf management. However, this potential will only be realised if the risks of algorithmic bias are addressed. If ignored, such bias can reinforce inequality and contradict Islamic priorities. To align with the principle of ‘adl, AI systems must incorporate transparent data governance and inclusive algorithmic design. Achieving this requires interdisciplinary collaboration among Islamic scholars, ethicists, and AI specialists, ensuring that technological innovation not only enhances efficiency but also actively promotes equity and prevents systemic injustice.
The next principle is the principle of Amanah (trustworthiness) which is strongly embedded in Islamic ethical teachings. The Prophet Muhammad (PBUH) stated, “Every one of you is a shepherd and every one of you is answerable with regard to his flock” (Sahih Bukhari and Muslim), highlighting the moral responsibility individuals and institutions bear. Studies in the financial sector suggest that Artificial Intelligence-driven fraud detection can reduce financial crime losses significantly, which further supports the argument that technology, when guided ethically, strengthens rather than weakens institutional credibility.
AI is expected to strengthen Shariah compliance in Islamic finance by automating the detection of transactions linked to prohibited (haram) activities such as riba, gambling, or alcohol. The deployment of generative AI demands critical scrutiny such as algorithms must not replicate interest-based logics found in conventional bonds or speculative derivatives, even under ostensibly neutral applications. AI-driven fraud detection tools are expected to monitor real-time transactions, automatically flagging potential Shariah violations, including concealed interest payments or speculative trading. This reduces reliance on manual auditing while embedding ethical safeguards into financial systems.
In the context of Islamic finance, al-Ihsan is the principle of striving for excellence. It extends beyond personal conduct to institutional practices such as financial reporting. While AI offers tools for efficiency through predictive analytics and automation, its true alignment with Ihsan lies in enhancing accuracy, timeliness, and clarity in disclosures. Financial reporting in Islamic institutions is not merely a regulatory requirement but a moral responsibility to stakeholders, including regulators, investors, and the wider community. By integrating AI systems that minimize errors, detect anomalies, and improve audit trails, institutions demonstrate a commitment to professional integrity and social responsibility.
Finally, the strategic application of AI has the potential to elevate the social impact of Islamic institutions. Artificial Intelligence can greatly enhance the effectiveness of zakat and waqf institutions. By identifying underserved communities, analysing social needs, and monitoring fund distribution, Artificial Intelligence can help ensure that assistance reaches those who deserve it most. This aligns directly with the Maqasid al Shariah, which aims to protect human welfare, dignity, and economic justice.
Ultimately, Artificial Intelligence in Islamic financial reporting should not be viewed as a threat to religious values. Instead, when guided by Shariah principles and strong ethical governance, it becomes a powerful tool for excellence, fairness, and social good. Islamic institutions therefore face not the question of whether to accept Artificial Intelligence, but how to adopt it with wisdom, responsibility, and unwavering commitment to moral integrity. When technology walks together with faith, it has the potential to elevate financial systems into instruments of justice, transparency, and trust for the benefit of society.
Dr Yazkhiruni Yahya is a Senior Lecturer at the Department of Accounting, Faculty of Business and Economics, University of Malaya
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