Realities and Innovation Challenges Potential Application of FinTech for Islamic Social Financing Institutions

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Author:
Year: 2018

Related Event : 13th International Shari’ah Scholars Forum | ISSF13
Date : 1st October 2018
Venue : Kuala Lumpur, Malaysia
Year : 2018

Blockchain is a distributed ledger technology which allows forming new systems to
record business’ transactions without the need for a central authority or third-party
intermediaries. It further allows managing the businesses jointly over the network.
This new decentralized technology is expected to offer more transparency and trust.
Furthermore, ‘smart contracts’ enabled by the blockchain are expected to digitally
facilitate the verification, enforcement, and possibly, executing the contract. This is
expected to offer high level of governance with cheaper cost as compared to the
traditional technologies. 
While there is a continuous effort to apply this innovative technology in several
businesses, Islamic Finance in general - and Islamic social finance in particular - are
facing few challenges that could be solved by such innovations. Islamic social
finance institutions such as waqf are facing some challenges in enhancing its
governance structure to ensure Shariah compliance as well as economic efficiency.
This paper explains how Blockchain and smart contract technologies can help these
institutions for better governance, lower transaction cost, more transparency and
higher trust; hence, enhancing the business flexibility and market accessibility. It also
presents some related cases that are currently under development as an evidence
for the practicality of these technologies in the Islamic social finance arena.   
Keywords: Blockchain, smart contracts, waqf, zakat, sadaqat, qardh hasan 


 

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