Islamic fintech applications and portfolio optimization usingmachine learning methods

This thesis examines the advantageous relationship between Islamic banking and fıntech in Türkiye, with a focus on its capacity to impact open banking. Islamic fintech can improve financial inclusion, operational efficiency, and compliance to ethical norms by combining Shariah principles with digital advancements. The study explores widely various fintech options, such as Shariah-compliant digital banking, crowdfunding, and the consequences of open banking systems. This study also investigates the application of six machine learning models, namely Gated Recurrent Unit (GRU), Bidirectional LSTM (Bi-LSTM), Long Short-Term Memory (LSTM) and XGBoost, and Random Forest (RF) and Support Vector Machine (SVM) in the stock price prediction in the Borsa Istanbul Katılım Tum Index between Q1 2007 - Q4 2022 with 163 stocks as well as LSTM, BiLSTM and GRU models for portfolio optimisation applications. The XGBoost model demonstrated superior performance, attaining the highest levels of accuracy in terms of stock price prediction. It produced an MAE (Mean Absolute Error) of 0.1619, MSE (Mean Squared Error) of 0.0377, RMSE (Root Mean Squared Error) of 0.1943. LSTM concluded with a highest equity value among models in terms of portfolio optimisation. The Bi-LSTM model exhibited the most favourable balance between risk and return, achieving the greatest annualised Sharpe Ratio of 0.0719. On the other hand, the GRU model demonstrated its capacity to respond to volatile markets, despite having the highest error metrics. These solutions demonstrate the flexibility and innovative capability of Islamic finance in addressing existing financial requirements while maintaining ethical and moral guidelines. The thesis supports for an integrated approach that includes the participation of the government, financial institutions, and technology players to drive the sector's progress. It suggests that by combining these efforts, Türkiye can establish itself as a leader in the worldwide Islamic fintech industry.