Al Hilal Bank, an Abu Dhabi-based Islamic bank, has executed “the world’s first sukuk transaction” using blockchain technology. Sukuk is the Arabic name for financial certificates, also commonly referred to as “sharia compliant” bonds.
Al Hilal Bank was founded by the Abu Dhabi Investment Council, an investment arm of the Abu Dhabi government. The bank provides Islamic personal, corporate, treasury, investment, and wholesale banking services to more than 100,000 customers. It also manages Al Hilal Global Balanced Fund, the Global Sukuk Fund and the GCC Equity Fund.
Reuters reported that the Islamic bank used the blockchain techology to sell and settle in the secondary market a small portion of its $500 million five-year sukuk. The bank claims that this was the first time that blockchain has been used worldwide to execute a sukuk transaction.
“We are proud to be the first bank to launch a ‘Smart Blockchain Islamic Sukuk, once again the bank has demonstrated that it has the capabilities of leading in the competitive market of Islamic banking,” said Al Hilal Bank CEO Alex Coelho. “The advantages of using smart contracts range from safer transactions with robust Shariah compliance, to the unlocking of new opportunities.”
The Smart Blockchain Islamic Sukuk initiative is the result of the collaboration of Al Hilal Bank Digital Transformation team with UAE-based FinTech firm Jibrel Network. Smart Sukuks will reportedly provide transactional efficiencies and significantly reduce the bloated overheads associated with issuing and settling Islamic Sukuks. The companies believe that by leveraging smart contracts to oversee the enforcement of Shariah compliance, operational efficiencies and automation benefits can be delivered.
“We are firm believers that by combining Jibrel’s tried and tested smart contract solutions with the world class industry expertise held by Al Hilal Bank’s Digital Transformation Team, we will be able to provide Islamic financiers with the necessary tools to facilitate Islamic agreements with the same speed, volume and efficiency experienced in conventional finance, and potentially develop new digital asset classes that were previously unimaginable,” said Jibrel Co-Founder Talal Tabbaa.
In August of this year, the World Bank and the Commonwealth Bank of Australia (CBA) issued the first blockchain bond worth over $80 million, which was successfully transacted on the ethereum network.