Explainable Generative AI for Sharia-Compliant Investment Decision-Making: A Comparative Study Between Saudi Arabia and Global Financial Markets

Abdullah A. Alasmari

Abstract

This study explores the integration of Explainable Generative Artificial Intelligence (XAI) within Sharia-compliant investment decision-making, offering a comparative analysis between the evolving financial markets of Saudi Arabia and established global financial centers. As Saudi Arabia rapidly modernizes its financial sector under the Vision 2030 framework, balancing technological innovation with strict adherence to Islamic finance principles—such as the prohibition of riba (interest) and gharar (uncertainty)—has become paramount. Generative AI offers unprecedented capabilities in financial modeling and portfolio optimization, yet its inherent 'black box' nature poses significant challenges for Sharia compliance, which demands transparency, ethical alignment, and clear accountability. Employing a comparative doctrinal and empirical methodology, this research examines how XAI frameworks—including SHAP (SHapley Additive exPlanations), LIME (Local Interpretable Model-Agnostic Explanations), and attention mechanisms—can bridge the gap between advanced algorithmic trading and Islamic ethical mandates. The study analyzes the regulatory landscape, contrasting the proactive initiatives of the Saudi Capital Market Authority (CMA) and Saudi Central Bank (SAMA) with regulatory approaches in the United States, United Kingdom, and European Union. Findings suggest that while global markets prioritize general algorithmic transparency and risk management, the Saudi context necessitates a specialized XAI framework that integrates halal screening methodologies directly into the AI's decision logic. The paper concludes with strategic recommendations for policymakers and financial institutions, emphasizing the need for robust Sharia-governance frameworks for AI, specialized regulatory sandboxes, and cross-border harmonization to foster a resilient, technologically advanced, and ethically compliant Islamic finance ecosystem.

Source: semanticscholar · PDF

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