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

 92
Year: 2018

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

Abstract

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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