The Islamic Research and Training Institute, the research arm of the Islamic Development Bank Group and SettleMint will embark on the journey to build a blockchain-based financial product that can potentially be used to support development and inclusion in IsDB member countries. SettleMint, together with their local partner Ateon, will be working on the first of its kind use case using Blockchain’s smart contracts to create Sharia-compliant financial products to support the development in IsDB member countries.
The evolution and increasing interest in Blockchain represents a paradigm shift in the industry. It is apparently disrupting (in a positive way) the traditional financial landscape, creating a wide array of new business opportunities and cutting operational costs dramatically
From an Islamic-economic perspective, money should be transparent, stable, and trustworthy. Blockchain technologies are able in principle to serve these objectives robustly and cost-effectively.
Smart contracts, a feature of Blockchain technologies such as Ethereum, are essentially self-executing digital contracts. The terms of the agreement between the parties in a transaction are electronically coded in smart contracts and will execute when pre-defined conditions are met. The use of smart contracts, therefore, enables the automation of the entire contractual process for Islamic institutions, alleviating the additional administrative and legal complexities and redundancies associated with Sharia-compliant financial products. Not only that, smart contracts are easy to verify, immutable and secure. The International Fiqh Academy has approved contracting through electronic means since 1990.
An additional attribute of Blockchain based transactional systems is the near instantaneous clearing and settlement of transactions and asset exchanges. This naturally mitigates considerable operational risks arising from clearing settlement and in many cases eliminates counterparty risk. This means that capital tied up on the balance sheet for financial services providers can be released and deployed to more productive ends. All in all, smart contracts and Blockchain-based clearing and settlement of transactions will, on the one hand, substantially streamline the operations of Islamic financial institutions and, on the other, potentially automate the entire contractual process.
SettleMint will deploy their Mint dAPI on top of custom designed Ethereum smart contracts and specific wallet software to bring this innovation to the IsDB member countries.
“We are very excited to be able to contribute to this project. One of the core values of SettleMint has always been to change the world for the better, and by using the blockchain technology to further financial inclusion and development of the 57 member countries, fits our ambitions to the letter.” – Matthew Van Niekerk, CEO & Founder SettleMint