ARTIFICIAL INTELLIGENCE IN LIQUIDITY RISK MANAGEMENT IN ISLAMIC BANKS: OPPORTUNITIES AND CHALLENGES
DOI:
https://doi.org/10.35631/AIJBAF.823001Keywords:
Artificial Intelligence (AI), Islamic Banking, Liquidity Risk Management, Sharia ComplianceAbstract
This article analyses the potential of artificial intelligence (AI) applications for managing liquidity risk in Islamic banks. These banks operate in accordance with Sharia, which prohibits several products used by conventional banks. This restriction limits access to financial instruments and can create challenges in liquidity management. This study compares the two liquidity management systems and demonstrates the usefulness of AI in addressing operational and analytical system problems. Studies in Malaysia and Indonesia have shown very high liquidity ratios that Islamic banks achieved during crises such as COVID-19. This study also shows that, thanks to the innovative and automated system of AI, it can ensure Sharia compliance and respect for ethics. With the regulatory and technical difficulties linked to data, AI offers tools for forecasting and generating liquidity. It helps in making decisions easier by helping them decide; thus, decreasing the chance of either liquidity risk or non-compliance. This research recommends methods for Islamic banks to adopt AI that will enhance the overall quality of the Islamic banking system and improve the way that ethics are incorporated.
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