Risk Management of Islamic Banking in Bangladesh Integrating Artificial Intelligence: A Revolutionary Approach to Risk Detection and Management

Abstract

This study intends to comprehend the usefulness and prospects of integrating artificial intelligence (AI) in managing the risks of Islamic banking in Bangladesh and explore how to identify and manage these risks through AI integration in banking. This research was carried out using a qualitative approach, data sourced from annual reports, regulatory guidelines, journal articles, books, relevant organizations’ websites, and organizational publications such as the Bangladesh Bank. The findings suggest that AI is essential for preventing risk and detecting fraud. The lack of regulatory provisions poses a substantial barrier to the adoption of artificial intelligence, particularly concerning data privacy and security, the availability of relevant expertise, and the development of an adequate IT infrastructure. Artificial intelligence (AI) has the possibility to substantially improve the competence and effectiveness of risk management in the banking industry. Although AI promises a variety of disruptive opportunities in the technological sector, including data acquisition, scrutiny, preventive, and consolidation processes, it also creates many kinds of threats to Islamic banks. It highlights the essential factors for recognizing the importance and potential obstacles in implementing AI technology, aiming to guide the utilization of AI in Bangladesh's Islamic banking operations.