Islamic FinTech: Paving the Way for Sustainable and Ethical Finance

Abstract

This study aims to explore the strategic role of Islamic financial technology (Islamic FinTech) as a pivotal input for promoting financial sustainability and ethical finance in light of accelerating digital transformations. The problem of the study stems from the gap that exists between the speed of technological innovation and the requirements of legal and regulatory compliance, which poses challenges to the efficiency of current models. The study relies on the descriptive analytical approach, with a critical comparative study between Islamic (Ethis) and traditional (LendingClub) crowdfunding models to analyze differences in risk management and social impact. The study concluded that integrating blockchain and artificial intelligence technologies contributes to reducing the costs of Sharia compliance and achieving "instant transparency" consistent with the purposes of Sharia. The comparison also demonstrated that the Islamic model provides greater resilience against the risks of accumulated debt thanks to the principle of risk sharing. The study presents a strategic framework that includes a "Performance Indicator Matrix" (KPIs) to integrate Global Sustainability Standards (ESG) with Sharia controls, providing a roadmap for legislators and financial institutions towards building a sustainable digital ethical financing system.