[ad_1]
Blockchain, an unalterable digital information recording system, is increasingly being discovered as a useful tool by Islamic financial institutions and banks. (Shutterstock)
Blockchain technology, an unalterable digital information recording system, is increasingly being discovered as a useful tool by financial institutions and Islamic banks for complex financing contracts and Shariah-compliant transactions, as well as for promoting innovation in the sector and improving transparency and traceability of transactions.
The first Islamic bank that started facilitating the blockchain was Emirates Islamic, part of the Emirates NBD banking group of the United Arab Emirates, which in 2017 started integrating the technology into check-based payment processes to strengthen its authenticity and minimize potential fraud.
Al Hilal Bank, headquartered in the United Arab Emirates, in November of last year became the first Islamic bank in the world to execute a sukuk transaction via blockchain in the financial center of the Abu Dhabi Global Market. The system, based on the Ethereum blockchain, was developed by Dubai's fintech Jibrel Network.
"We are proud to be the first bank to launch a & quot; smart blockchain Islamic sukuk & # 39;" said Alex Coelho, CEO of Al Hilal Bank, listing the benefits of using technology as "efficiency in terms costs, solid Shariah compliance and unlocking new opportunities. "
The Islamic Development Bank (IDB) of Saudi Arabia – through its private sector division of Islamic Corp for private sector development (ICD) – has started to cooperate with fintech cryptocurrencies to develop smart contracts and other blockchain-based innovations for Islamic finance. One of its partners is iFinTech Solutions, a fintech based in Tunis, which is working on the development of blockchain products to solve problems of liquidity management and goods transactions in Islamic finance, as well as interbanking relations between conventional and Islamic banks to ensure their compliance with Sharia.
Read more
Blockchain technology evolves despite Cryptocurrency Crash
Opinion: How energy sectors can implement blockchain effectively
"Information technology will always play an important role in the financial system," said ICD's new CEO Ayman Sejiny, adding that "we will consistently pursue our service-oriented strategy and help our partners with innovative fintech solution compliant with the Shariah standard ".
In another move, IDB's Islamic research and training institute has partnered with fintech Ateon companies in Riyadh and SettleMint in Dubai to work on blockchain-based smart contracts in order to create Shariah-compliant financial products. and automate the entire contract process for Islamic financial institutions.
There are also some startups of Islamic cryptocurrencies that implement blockchain technology, including OneGram based in Dubai and HelloGold of Malaysia, in addition to the Islamic microfinance company Blossom Finance from Indonesia. All of these companies have been approved by Islamic scholars to offer Sharia-compliant financial products.
The applications of the blockchain in Islamic finance are many, but three fundamental uses are of particular importance. We have already talked about smart contracts for Islamic financial transactions, which cover the management of profit-sharing agreements, agency agreements and partnerships, reducing uncertainty for all stakeholders and achieving the best possible legal clarity.
Another application is cloud storage, which provides access to all the necessary information on Islamic financial transactions for banks and clients to avoid conflicts, maintain and promote partnerships with customers and increase transparency. Because blockchain combines the security of cryptography and the storage and transmission of data in encrypted form with peer-to-peer networks to create a shared database of transactions, data is stored digitally with ease, unalterable and openly accessible, the which makes Islamic financial transactions, investments and financing agreements openly verifiable processes for all stakeholders.
Finally, the blockchain in Islamic finance combined with mobile technology can also be used for Islamic communities in developing and poorer countries lacking basic infrastructure. Being a low-cost technology, it is able to make banking processes and transactions accessible through simplistic smartphone applications while ensuring the traceability and transparency of banking transactions for retail clients.
By Arno Maierbrugger
[ad_2]Source link
