Application of AI in the circular economy: development finance institutions’ role in resource optimization in the industry

The circular economy is a crucial strategy for sustainable industrial development, reducing waste and optimizing resource utilization and production. Artificial Intelligence (AI) can help drive this evolution, and Development Finance Institutions (DFIs) can play a significant role in promoting the adoption of AI in sectors transforming a circular economy. This systematic review analyzes 11 studies published between 2020 and 2024 to explore the integration of AI, the circular economy, DFIs, and industrial sustainability in the implementation of AI-based resource management. The study highlights the importance of AI in improving resource management, waste reduction, and circular manufacturing through machine learning, predictive analytics, and blockchain. It highlights the role of DFIs in financing, assisting, and policy interventions for AI integration in industrial processes, particularly in developing countries. However, challenges such as high initial costs, lack of expertise, and low digital development in these regions remain. Thus, policy recommendations call for DFIs and governments to foster environmental conditions by providing financial incentives, enhancing local capacities, and investing in innovative solutions. This study informs the policies, development finance institutions, and relevant industries for improving the circular economy through AI interventions in future Nigeria. It adds to the increasing literature on how AI holds significant promise for evoking disruption in industrial systems and situates DFIs strategically as key drivers of resource efficiency and resiliency.