BOOSTING THE ISLAMIC FINANCE SECTOR WITH BLOCKCHAIN Sharia law prohibits banks from charging
f rom these late-payment charges, they are
for the technology to automate the
interest on loans to their borrowers.
not incentivised to collect these fees and
execution of Shariah contracts and
Islamic banks offer financing to individuals
distribute them to charitable organisations
minimise the risk of procedural errors. It
and businesses through real economic
in a timely manner. Meanwhile, the
could also improve the traceability and
transactions such as joint ventures,
debtors see these late fees as an act
transparency of certain funds in complex
deferred sale, and leasing agreements.
of charity, meaning that their sense of
humanitarian settings.
To offer credit financing, Islamic banks
urgency to pay their debt obligations on
need a mechanism to discipline debtors to
time might diminish.
Although the technology is still a
pay on time. A common practice involves
controversial topic in Islamic finance, both
charging debtors with late fees, which
Blockchain originally impacted Islamic
the Middle East and Southeast Asia are
are then donated to charity. However,
finance through optimisations like
home to a growing number of Islamic
because Islamic banks are not allowed to
blockchain-based Halal certification
fintechs.
incur any profit and in turn any benefit
schemes but there’s a growing demand
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