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Enhancing trust through digital Islamic finance and blockchain technology

Enhancing trust through digital Islamic finance and blockchain technology This paper aims to provide a reflective discussion on the different avenues of blockchain application in Islamic finance in promoting trust and transparency for increased accountability between parties involved in the delivery of Sharīʿah-compliant products and services.Design/methodology/approachThis paper discusses on blockchain benefits in Islamic finance while providing an illustration with smart Sukuk. Having identified the advantages of the development of Islamic financial technology (i-FinTech), this study ends by debating a couple of challenges (computational codification of Sharīʿah principles and environmental impact) that have to be addressed to promote the development of a real sustainable Islamic FinTech.FindingsThis paper also identifies two challenges in using blockchain in i-Fintech. The first challenge refers to the extent to which Sharīʿah principles can be computationally encoded. Blockchain makes public all transactions that ease Sharīʿah compliance checks and determine if these transactions are Islamic in nature but this check can be done only after their operation. The second challenge is related to the algorithmic protocol used to validate smart contracts (including smart Sukuk). This situation calls into question the principles of Maqasid al-Sharīʿah according to which transactions should not harm society.Originality/valueIn the current debates related to the development of Islamic FinTech, this paper also identifies two challenges in using blockchain in i-Fintech. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Qualitative Research in Financial Markets Emerald Publishing

Enhancing trust through digital Islamic finance and blockchain technology

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1755-4179
DOI
10.1108/qrfm-05-2020-0076
Publisher site
See Article on Publisher Site

Abstract

This paper aims to provide a reflective discussion on the different avenues of blockchain application in Islamic finance in promoting trust and transparency for increased accountability between parties involved in the delivery of Sharīʿah-compliant products and services.Design/methodology/approachThis paper discusses on blockchain benefits in Islamic finance while providing an illustration with smart Sukuk. Having identified the advantages of the development of Islamic financial technology (i-FinTech), this study ends by debating a couple of challenges (computational codification of Sharīʿah principles and environmental impact) that have to be addressed to promote the development of a real sustainable Islamic FinTech.FindingsThis paper also identifies two challenges in using blockchain in i-Fintech. The first challenge refers to the extent to which Sharīʿah principles can be computationally encoded. Blockchain makes public all transactions that ease Sharīʿah compliance checks and determine if these transactions are Islamic in nature but this check can be done only after their operation. The second challenge is related to the algorithmic protocol used to validate smart contracts (including smart Sukuk). This situation calls into question the principles of Maqasid al-Sharīʿah according to which transactions should not harm society.Originality/valueIn the current debates related to the development of Islamic FinTech, this paper also identifies two challenges in using blockchain in i-Fintech.

Journal

Qualitative Research in Financial MarketsEmerald Publishing

Published: Jun 22, 2021

Keywords: Trust; Blockchain; i-FinTech; Islamic finance; Blockchain

References