Abstract
Sukuk have proven to be a significant innovation in the Islamic finance industry, introduced as an alternative to conventional bonds and securities. Aiming for fairer distribution of market risk between the haves and have-nots, Islamic finance focuses on funding the purchase of real assets rather than simply borrowing money. However, in reality, this requirement of “asset-backed” borrowing has limited the growth of the sukuk segment. We propose the application of blockchain technology to enhance the traceability of credit to the specific financed assets. Sukuk transactions can involve a number of parties, especially when sale, lease and agency contracts are combined. Some recent sukuk-default scandals transpired to have avoided “true sale” of underlying assets. Since the opinion of religious scholars can have a significant impact on the valuation of sukuk, we believe that the traceability of asset transfers will enhance sukuk credibility and valuation. Moreover, a smart contract infrastructure with blockchain security should also significantly reduce the execution time for such transactions. We present an initial model for blockchained sukuk-issue in this paper, highlighting the significant design features that specifically concern this niche market.
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Shaikh, S., Zaka, F. (2019). Blockchained Sukuk-Financing. In: Mehandjiev, N., Saadouni, B. (eds) Enterprise Applications, Markets and Services in the Finance Industry. FinanceCom 2018. Lecture Notes in Business Information Processing, vol 345. Springer, Cham. https://doi.org/10.1007/978-3-030-19037-8_5
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DOI: https://doi.org/10.1007/978-3-030-19037-8_5
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