Islamic Fintech and Shariah Governance: A Conceptual Framework

Abstract

The rapid development of financial technology has transformed the structure and delivery of financial services, including within the Islamic finance industry. Islamic fintech provides opportunities to enhance financial inclusion, improve operational efficiency, and expand access to Shariah-compliant financial products and services. However, the adoption of fintech in Islamic finance also creates Shariah, ethical, technological, and regulatory challenges. These include Shariah non-compliance risk, gharar and contractual uncertainty, data privacy concerns, cybersecurity threats, algorithmic bias, consumer protection issues, and operational and reputational risks. Therefore, this paper aims to conceptually examine the relationship between Islamic fintech and Shariah governance. Specifically, it discusses the role of Shariah governance in Islamic fintech development, identifies the main Shariah and ethical challenges arising from fintech adoption, and proposes how Shariah governance can be strengthened to support sustainable Islamic fintech. This study adopts a qualitative conceptual research design based on library-based research and thematic literature review. The paper synthesises previous studies, regulatory documents, Shariah governance standards, and Islamic fintech literature. The findings indicate that Shariah governance plays a central role as both a compliance mechanism and a trust-building mechanism in Islamic fintech. The study further finds that Islamic fintech requires a continuous and risk-based governance process rather than one-time Shariah approval. Accordingly, this paper proposes a Risk-Based Maqasid Shariah Governance Framework for Islamic Fintech, which integrates Islamic fintech innovation, Shariah and technology risks, risk-based Shariah governance processes, Maqasid al-Shariah principles, and sustainable Islamic fintech outcomes. This paper contributes to the Islamic finance literature by developing a conceptual framework that explains how Shariah governance can be strengthened to address the challenges of digital financial innovation.