[ad_1]
Islamic financial institutions are increasingly using blockchain technology for complex financing terms, Shariah-compliant transactions and alternatives that comply with Islamic norms and sharia over conventional insurances. Blockchain can provide assistance in KYC, back-office automation and micro-insurance underwriting.
Several Islamic financial institutions are looking for Blockchain
Emirates Islamic was the first Islamic bank to test the blockchain. It is part of the Emirates NBD banking group of the United Arab Emirates. As early as 2017 the bank integrated the technology into payment processes based on checks. This has strengthened their authenticity and minimized the potential for fraud.
The Al Hilal bank, headquartered in the United Arab Emirates, has become the first Islamic bank in the world to complete a "sukuk operation" on the blockchain of the financial center of the Abu Dhabi global market. A sukuk is an Islamic financial certificate, a bit like a link in Western finance, which respects Islamic religious law Sharia.
Based on the Ethereum blockchain, the system was developed by the fintech startup incubated in Dubai Jibrel Network. This company provides currencies, stocks, commodities and other financial assets as ERC-20 standard tokens on the Ethereum blockchain.
"We are proud to be the first bank to launch a" Islamic sukuk smart blockchain ", said Alex Coelho, CEO of Al Hilal Bank, underlining the" economic convenience, solid compliance with Shariah and the unlocking of new opportunities "by Blockchain .
The Islamic Corp for Private Sector Development (ICD) has collaborated for the first time with cryptocurrency startups on smart contracts and other blockchain-based innovations for Islamic finance.
An ICD partner, the iFinTech solution, based in Tunis, is developing blockchain products to solve the challenges of liquidity management and commodity transactions in Islamic finance, including interbanking relations between conventional and Islamic banks to ensure compliance of the Sharia.
"Information technology will always play an important role in the financial system," said ICD CEO Ayman Sejiny.
We will constantly follow our service orientation strategy and help our partners with innovative fintech-compliant Shariah solutions.
The Institute for Research and Training of IDB is also collaborating with the fintech companies Ateon of Riyadh and SettleMint in Dubai with smart contracts based on blockchain in order to create financial products compliant with Shariah. The idea is to automate the entire contract process for Islamic financial institutions.
Startups approved to offer Shariah-compliant financial products include Dubai-based Blockchain start-ups include OneGram, Malaysia & # 39; s HelloGold and the Islamic microfinance company Blossom Finance from Indonesia.
Blockchain certification could make halal certifications easier. POCertify is a new dApp on the blockchain. Use smart contract technology to publish Halal certificates. Halal is the permissible Arabic word and, in this case, refers primarily to food. Halal-classified foods must be certified according to different Islamic guidelines.
"Blockchain technology, along with Islamic principles, will digitally encrypt the Halal certificate in its PDF format and verify the Halal certificate on the blockchain," says founder Shabeer Shaik Abdurahaman, who specializes in Islamic fintech.
If it is properly verified, it is used and, otherwise, the manufacturer or supplier does not receive the certificate.
How is Blockchain used?
In addition to food certification, Islamic financial institutions use the blockchain for the following reasons:
- smart contracts used for the management of profit sharing agreements, agency agreements and partnerships.
- verification of Islamic financial transactions for banks and clients in order to avoid conflicts and facilitate partnerships with customers and greater transparency.
- integration with mobile technology in countries that do not have legacy banking infrastructure.
Blockchain can also be used in the banking sector and in smartphone app transactions, maintaining the traceability and transparency of banking transactions for retail clients.
Will blockchain technology be integrated into Islamic finance? Share your thoughts below!
Images courtesy of Shutterstock
