Shariah Compliance Management in P2P Financing: An Exploratory Study on Islamic FinTech

Abstract

Shariah compliance in financial technology (fintech) is crucial for maintaining the trust of stakeholders and ensuring ethical financial practices. This article studies the intricacies of Shariah compliance management in peer-to-peer (P2P) financing within the burgeoning Islamic fintech sector. As P2P financing platforms grow in popularity, their alignment with Islamic principles such as Riba (usury) prohibition, Gharar (uncertainty) reduction, and the promotion of ethical financial practices becomes a focal point for ensuring legitimacy and market sustainability. Utilising a qualitative methodology and in-depth literature review approach to identify best practices in ensuring compliance while balancing innovation and operational efficiency, this study explores how Islamic fintech platforms implement compliance mechanisms, engage with Shariah advisory boards, and leverage technology to ensure adherence to Islamic jurisprudence. Key findings reveal that while fintech platforms offer promising opportunities to broaden financial inclusion and empower underbanked communities, they face challenges such as regulatory fragmentation, the integration of Shariah principles with evolving technologies, and limited awareness among stakeholders. Recommendations emphasise the importance of robust governance structures, effective communication between Shariah boards and platform operators, and the adoption of advanced compliance technologies such as smart contracts and AI-driven monitoring systems. By aligning fintech operations with Islamic ethics, this study highlights how P2P platforms can foster trust, expand market reach, and contribute to the broader goals of ethical finance. This article provides actionable insights for policymakers, fintech innovators, and Islamic finance scholars to advance Shariah-compliant financial ecosystems.