Volume 3 Issue 1 | 2026 | View PDF
Paper Id:IJMSM-V3I1P121
doi: 10.71141/30485037/V3I1P121

From Black-Box to Halal-Box: AI Ethics, Algorithmic Transparency, and Digital Consumer Protection in Islamic FinTech

Md. Shahed Alamm

Citation:
Md. Shahed Alamm, "From Black-Box to Halal-Box: AI Ethics, Algorithmic Transparency, and Digital Consumer Protection in Islamic FinTech" International Journal of Multidisciplinary on Science and Management, Vol. 3, No. 1, pp. 216-232, 2026.

Abstract:
Artificial intelligence (AI) has become ubiquitous in modern financial services. Yet, the opacity of algorithmic decision-making poses significant risks to consumer protection and ethical integrity, particularly in Islamic FinTech applications serving Muslim-majority emerging markets. The paper offers a framework of “Halal-Box” AI governance, which combines Islamic legal considerations, such as justice (’adl), transparency (bayān), trust (amanah), and Maqasid al-Shariah with the modern AI ethics and consumer protection regulations. A sequential mixed-methodology approach is used, in which we first construct a normative framework via an Islamic jurisprudence, AI ethics literature, establishing six principles: Justice & Non-Discrimination, Transparency & Explainability, Data Amanah and Privacy, No Exploitation and Minimisation of harm, Maslahah and Inclusive access and Accountability and shariah oversight. Then, we perform a cross-sectional survey (N=340) of FinTech users located in Bangladesh and other OIC economies who use Islamic FinTech and estimate how they perceive algorithmic transparency, fairness, data privacy, Shari’ah compliance, platform trust, satisfaction and their intention to adopt it. We find that, the perceived algorithmic transparency and Shari alignment are the important predictors of user trust and intention to adopt, and Shari alignment acts as the mediator between AI ethics perception and behavioral outcome. We also offer some practical governance advice to Islamic FinTech providers, regulators, and Shari’ah boards, which provides a blueprint to transitioning to a black-box to ethically transparent, consumer-centric digital financial services.

Keywords: Islamic FinTech, AI Ethics, Algorithmic Transparency, Consumer Protection, Shari’ah compliance, Digital Finance, Maqasid al-Shariah, Emerging Markets.

References:
1. R. AlRemeithi and Y. Al Qassem, “Artificial Intelligence in Islamic Financial Institutions: Applications and Implications,” Islamic Finance News, vol. 17, no. 45, pp. 12–18, 2020.
2. A.H. Al-Ghazali, The Objectives of Islamic Law, International Institute of Islamic Thought, 2005.
3. M. Asutay, “A Political Economy Approach to Islamic Economics: Systemic Understanding for an Alternative Economic System,” Kyoto Bulletin of Islamic Area Studies, vol. 1, no. 2, pp. 3–18, 2007.
4. A.F. Aysan and M. Ünal, “Fintech and Blockchain in Islamic Finance: A Bibliometric Analysis,” Journal of Islamic Finance, vol. 10, no. 2, pp. 89–104, 2021.
5. J. Buolamwini and T. Gebru, “Gender Shades: Intersectional Accuracy Disparities in Commercial Gender Classification,” Proceedings of Machine Learning Research (Conference on Fairness, Accountability and Transparency), vol. 81, pp. 77–91, 2018.
6. G. Buchak, G. Matvos, T. Piskorski, and A. Seru, “Fintech, Regulatory Arbitrage, and the Rise of Shadow Banks,” Journal of Financial Economics, vol. 130, no. 3, pp. 453–474, 2018.
7. M.U. Chapra, The Islamic Vision of Development in the Light of Maqasid al-Shari’ah, Islamic Development Bank, 2000.
8. S. Corbett-Davies, E. Pierson, A. Feller, S. Goel, and A. Huq, “Algorithmic Decision Making and the Cost of Fairness,” Proceedings of the 23rd ACM SIGKDD International Conference, pp. 797–806, 2017.
9. J. Dressel and H. Farid, “The Accuracy, Fairness, and Limits of Predicting Recidivism,” Science Advances, vol. 4, no. 1, p. eaao5580, 2018.
10. A.W. Dusuki and N.I. Abdullah, “Maqasid al-Shariah and Its Implications for Islamic Finance,” Islamic Economics and Finance, vol. 2, no. 3, pp. 43–58, 2007.
11. M. Kahf, Islamic Finance and Economics, Islamic Book Trust, 2003.
12. M.H. Kamali, Shari’ah and the Challenges of Modernity, Ilmiah Publishers, 2008.
13. B. Mittelstadt, “From Individual to Group Privacy in Big Data Analytics,” Philosophy & Technology, vol. 30, no. 4, pp. 475–494, 2017.
14. V. Nienhaus, “Islamic Economics, Finance and Banking,” Journal of the Centre for Middle Eastern Studies, vol. 9, no. 2, pp. 155–168, 2007.
15. A. Rességuier and R. Rodrigues, “AI Ethics Should Not Remain Toothless!,” Science and Engineering Ethics, vol. 26, no. 1, pp. 569–587, 2020.
16. A.D. Selbst and S. Barocas, “The Watered Down Account of Fairness in Machine Learning,” arXiv preprint arXiv:1811.03435, 2018.
17. M.A. Siddiqui and S. Hussain, “AI Ethics in Islamic FinTech: Toward a Values-Based Governance Framework,” Islamic Finance and Technology Review, vol. 8, no. 1, pp. 34–52, 2024.
18. K. Yeung, “Hypernudges: Private Digital Choice Architectures and Public Regulation,” in Regulating AI, pp. 220–245, 2018.
19. I. Abdelkafi and N. Hachicha, “Artificial Intelligence (AI) in Islamic Finance: A Maqasid al-Shariah Perspective,” International Journal of Law, Government and Communication, vol. 10, no. 39, 2025.
20. Y.A. Al-Matari and A. Al-Swidi, “AI, Shariah Governance, and Maqasid Shariah in Islamic Finance,” International Journal of Research and Innovation in Social Science, vol. 9, no. 9, pp. 9972–9977, 2025.
21. F.A. Hudaefi and K. Noordin, “Artificial Intelligence (AI) in Islamic Finance: A PRISMA-Guided Systematic Review on Sharia Compliance,” EQUILIBRIA PENDIDIKAN: Jurnal Ilmiah Ekonomi dan Pendidikan, vol. 10, no. 2, 2025.
22. M.A. Siddiqui, et al., “AI-Driven Shariah Compliance: Strategic Implications for Islamic Fintech in Emerging Markets,” SSRN Electronic Journal, 2025.
23. Islamic Financial Services Board (IFSB), Global Islamic Fintech Report 2024/25, Qatar Financial Centre, 2025.
24. Bangladesh Bank, Guidelines on the Use of Artificial Intelligence in Banking and Financial Institutions, 2025.
25. A.E. Widjaja, et al., “Integrating Maqāṣid al-Sharīʿah into Islamic Fintech: An Ethical Framework for Sustainable Digital Finance in the Era of Industry 4.0,” Journal of Ethics and Corporate Governance, 2025.
26. F. Alqahtani, et al., “Artificial Intelligence and Shariah Governance in Islamic Finance: Institutional Design, Value Creation, and Risk Management,” SUKUK Journal, 2025.
27. Z. Zahid, Z.M.E. Haque, and M.S. Alamm, “The Heterodox Intersection: Sharīʿah-Compliant Smart Contracts in the Age of Sovereign Digital Currencies,” Proceedings of the VI. International Congress of Cultural Landscapes, vol. 1, p. 126, 2025.
28. Z. Zahid, Z.M.E. Haque, M.S. Alamm, M.M. Parves, and M.M.A. Alam, “From Riba-Free to Risk-Sharing to Regenerative: The Evolution of Value-Based Islamic Finance,” ISRG Journal of Economics and Finance (ISRGJEF), vol. 2, no. 5, pp. 30–38, 2025.
29. B.A.K. Mohammed, Z. Zahid, and M.E. Hossain, “Advancing Ethical Stewardship: A Green AI Framework for Optimizing Sustainable Investments in Islamic Financial Systems,” International Journal of Artificial Intelligence & Applications (IJAIA), vol. 16, no. 6, pp. 27–46, 2025.
30. Z. Zahid, M.R. Amin, M.S. Alamm, and M.M. Parves, “Enhancing AgriChain Management in South Asia: The Role of Fintech and Islamic Social Finance in Sustainable Agribusiness,” International Journal of Business and Management (IJBM), vol. 4, no. 2, pp. 417–440, 2025.