Four AI-based transforming trends in Islamic venture capital

Personalized shopping, real-time translations, autonomous vehicles, medical diagnostics… The Artificial Intelligence (AI) is transforming our lives as I am typing these words. 125.2 million people around the globe regularly talk to Siri, or other voice assistants. The labor market is expecting a major shift not seen since the UK Industrial Revolution of 1750.

Islamic venture capital (VC) will not stay immune to technological changes effected by Artificial Intellect — the new environment will affect the funders and the startups alike.

I outline a few major shifts in Islamic VC that will become mainstream in the next 3–5 years:

I. AI will help generate startup ideas

AI can assist in generating startup ideas by analyzing vast amounts of data to identify emerging trends, market gaps, and consumer needs. The current market trends include Shariah compliant robo-advisory, Riba-free international remittances and crowdfunding. Perhaps, the future trends would include fractional asset management, or palladium-based Islamic microfinance? Additionally, AI can simulate market scenarios to evaluate the potential success of different startup concepts.

II. AI will provide legal advice for startups

In the absence of the developed Islamic business angel environment (with notable exceptions of Ethis Super Angels, HASAN and IFG.VC) and Shariah compliant seed venture capital funding, many Islamic startups struggle to finance quality legal advice. The AI can provide legal assistance for startups by utilizing advanced NLP and legal databases. AI-driven legal platforms can draft and review contracts, ensure compliance with relevant regulations and laws and provide guidance on intellectual property rights, employment law, and corporate governance.

III. AI will review funding options available to startups

A properly prompted AI systems can compare various funding sources such as venture capital firms, angel investors, grants, and loans, as well as evaluate the terms and conditions associated with different funding options. I used OpenAI ChatGPT and found at least 40 sources of Shariah compliant capital, including our own digiwaqf.

IV. AI will analyze Shariah law and Fatwas

The great majority of Islamic startups are deficient in this particular area, complying with the spirit rather than with the letter of Shariah. The AI’s assistance can include provision of insights on compliance with specific aspects of Shariah law, such as financial transactions, business practices, and ethical considerations as well as cross-referencing different legal opinions and rulings from recognized Islamic scholars. What is more important is that the AI can identify potential areas of non-compliance and recommending necessary adjustments. To ensure the validity of its analysis, AI must be trained on a comprehensive dataset of Fatwas and Shariah compliance standards.

Overall, “Islam is a religion that accepts all forms of technological progress, including advances in artificial intelligence. However, in its use, Islam emphasizes that technology must be used wisely and must pay attention to the effects on human life and the environment”. (International Journal of Islamic Studies Vol. 35, №1, 2023)