The Saudi-based Islamic Corporation for the Development of the Private Sector (ICD) has penned an agreement with a Tunis-based fintech company to develop blockchain solutions for Islamic banks, it has been announced.
In a statement, the ICD - which is the private sector arm of Islamic Development Bank Group – said it signed an investment agreement with I-FinTech Solutions (IFTS) to develop a pipeline of products which are designed mainly to solve liquidity management issues.
The first product in the pipeline is slated to be a real-time platform which facilitates transacting of real commodities and to solve inter-banking issues between conventional and Islamic bans in a Sharia-compliant manner.
According to ICD, by using blockchain the product will reduce overall execution times as well as the cost of the financial and commercial transaction. Additionally, it is also expected to improve the transparency and traceability of the transactions.
“IT will always play an important role for the financial system,” said ICD CEO Ayman Sejiny. “We will consistently pursue our strategy of service orientation and help our partners with innovative Sharia-compliant fintech solution.”
Currently, Islamic banks are largely restricted from money markets and interest-bearing funded tools provided by central banks, which could potentially be disadvantageous during a liquidity crunch.
Last week, UAE-based Al Hilal Bank became the world’s first Islamic bank to use blockchain technology for the resale and settlement of an Islamic Sukuk. According to ceo Alex Coelho, the technology will pave the way for more digitised “smart” Islamic Sukuks, one of the fastest growing asset classes in recent years.