This article examines the challenges of digital transformation within Islamic Social Finance (ISF), with a focus on Brunei Darussalam. Islamic social finance, encompassing mechanisms like zakat, waqf, and sadaqah, plays a crucial role in social welfare by addressing poverty, healthcare, education, and community development. The efficiency, transparency, and reach of these processes could be improved by digital transformation, but putting such changes into practice inside ISF is difficult, particularly when it comes to Shariah compliance. The research method used is a Systematic Literature Review with a descriptive approach with a mixture of collecting relevant and legitimate academic literature from diverse sources. The study aims to (1) explore the current advancements in Digital-driven innovations and their impact on the Islamic finance industry; (2) identify the gaps in the ISF research and make suggestions for the further scope of the study; (3) provide an in-depth overview of digital transformation for ISF in Brunei, by highlighting specific issues and challenges related to their application in the Islamic finance industry. This paper offers a conceptual framework for comprehending how technology may potentially transform ISF in Brunei by examining current literature and international trends. Key findings show that obstacles to digital transformation in Brunei's ISF include lack of digital knowledge and adoption among stakeholders, technological infrastructure constraints, market competitiveness, regulatory and Shariah compliance difficulties. Moreover, concerns about cybersecurity, which are particularly significant for financial transactions involving public confidence, exacerbate these problems. Among potential approaches for Brunei are highlighted by a comparison study with nations like Malaysia and Indonesia, where digital tools have been successfully included into ISF. These tactics include partnerships with fintech companies to create Shariah-compliant platforms, government engagement to provide clear regulatory frameworks, and educational initiatives to increase public knowledge of the advantages of digital Islamic finance and prevent malpractices. Improving literacy and increasing access to technology is essential to help narrow the gap and ensure equal participation in financial sectors for inclusiveness. The article's conclusion highlights Brunei's ability to spearhead the digital transformation of ISF on a regional and international scale and stresses the value of digital technologies in building an effective, accessible, and user-friendly ISF ecosystem. In this era of technological transformation, by addressing these challenges while leveraging the capabilities of instruments compliant with Shariah principles, ISF mechanisms may drive sustainable inclusive finance.

Keywords

• Islamic Social Finance,
• Digital Transformation,
• Growth,
• Challenges

How to Cite

Muhammad Irwandi bin Haji Zaini, & Dk Saiyidahtul Syahirah binti Pg Radin. (2025). Understanding The Obstacles in Digital Transformation for Islamic Social Finance: Insights from Brunei Darussalam. IEco | Islamic Economics Journal, 3(1), 101–115. Retrieved from https://unissa.edu.bn/journal/index.php/ieco/article/view/1335