Blockchain is making headway in the world of Islamic finance.
Saudi Arabia’s Islamic Development Bank (IDB) signed an investment agreement in November with i-FinTech Solutions, a Tunisia-based advisory firm, to create a series of shariah-compliant tools to help Islamic banks with liquidity management issues. The first product announced is i-Trade, a blockchain-based, real-time transactional platform that helps conventional and Islamic banks transact with each other.
Blockchain technology is still a controversial topic in Islamic finance. Nevertheless, the Middle East as well as Southeast Asia are home to a growing number of Islamic fintechs.
“The use of blockchain in this asset-liability management product will reduce both the overall execution time and the cost of the financial and commercial transaction,” the IDB announced. “It also addresses the issues and challenges related to transparency and traceability of the financial transactions.”
Islamic banks, which ban the collection of interest, have limited access to most of the money markets and funding tools available in conventional banking. Investing in fintech offers a way for them to develop tools that can help them penetrate new markets.