Fintech and Shariah Principles in Smart Contracts

2019 ◽  
pp. 207-220 ◽  
Author(s):  
Norafni Farlina Rahim ◽  
Mohammed Hariri Bakri ◽  
Siti Norbaya Yahaya
Keyword(s):  
Early Stage ◽  
Emerging Technology ◽  
Islamic Finance ◽  
Disruptive Technology ◽  
Smart Contracts ◽  
Financial Transaction ◽  
Finance Industry ◽  
Faith Based ◽  
Smart Contract ◽  
Financial Technology

FinTech, or financial technology, is an emerging technology in financial transaction. It is disruptive technology which is changing the banking behavior for stakeholders. The thriving emergence of FinTech not only affects the conventional finance industry but also Islamic finance industry, as Islamic finance sector is also embracing FinTech as part of financial revolution. Thus, the Islamic FinTech emerges as faith-based FinTech. This is because Islamic FinTech claimed to comply with Shariah principle in their mechanism and smart contract. There is limited discussion on smart contract and Islamic FinTech and its Shariah principles. Hence, the Shariah principle in smart contract of Islamic FinTech need to be addressed. This chapter tries to delve into the smart contract concept in Islamic FinTech and Shariah principles in the mechanism. The review found that smart contract is currently in the early stage and so is Islamic FinTech. The scholars agreed that FinTech is a Maslahah (interest) to mankind's benefit. However, the smart contract is still in discussion and review.

scholarly journals Artificial Intelligence, Smart Contract and Islamic Finance

2018 ◽  
Vol 14 (2) ◽  
pp. 145 ◽  
Author(s):  
Siti Rohaya Mat Rahim ◽  
Zam Zuriyati Mohamad ◽  
Juliana Abu Bakar ◽  
Farhana Hanim Mohsin ◽  
Norhayati Md Isa
Keyword(s):  
Artificial Intelligence ◽  
Computer Code ◽  
Islamic Finance ◽  
Human Intelligence ◽  
Human Beings ◽  
Finance Industry ◽  
Smart Contract ◽  
Huge Impact ◽  
Block Chain

This study examines the two important aspect of latest technology issues in Islamic finance that related to artificial intelligence (AI) and smart contract. AI refers to the ability of machines to understand, think, and learn in a similar way to human beings, indicating the possibility of using computers to simulate human intelligence. Smart contract is a computer code running on top of a block-chain containing a set of rules under which the parties to that smart contract agree to interact with each other. The main objectives of this article are to evaluate the operations of AI and smart contract, to make comparison between the operations of AI and smart contract. This article concludes that AI and smart contract will have a huge impact in future for Islamic Finance industry.

Blockchain for Islamic Social Responsibility Institutions

2019 ◽  
pp. 221-240 ◽  
Author(s):  
Moutaz Abojeib ◽  
Farrukh Habib
Keyword(s):  
Social Responsibility ◽  
Transaction Cost ◽  
Economic Efficiency ◽  
Governance Structure ◽  
Innovative Technology ◽  
Islamic Finance ◽  
Smart Contracts ◽  
Smart Contract ◽  
Traditional Technologies ◽  
High Level

Blockchain and smart contracts are forming new systems to record and manage businesses with less need for intermediaries. The new systems are expected to offer high level of governance with lower cost as compared to the traditional technologies. While there is a continuous effort to apply this innovative technology in several businesses, Islamic finance in general—and Islamic social finance in particular—are facing few challenges that could be solved by such innovations. Islamic social finance institutions such as waqf are facing some challenges in enhancing its governance structure to ensure Shariah compliance as well as economic efficiency. This chapter explains how blockchain and smart contract technologies can help these institutions for better governance, lower transaction cost, more transparency, and higher trust, hence enhancing the business flexibility and market accessibility. It also presents some related cases that are currently under development as an evidence for the practicality of these technologies in the Islamic social finance arena.

Blockchain for Islamic Social Responsibility Institutions

2021 ◽  
pp. 1114-1128
Author(s):  
Moutaz Abojeib ◽  
Farrukh Habib
Keyword(s):  
Social Responsibility ◽  
Transaction Cost ◽  
Economic Efficiency ◽  
Governance Structure ◽  
Innovative Technology ◽  
Islamic Finance ◽  
Smart Contracts ◽  
Smart Contract ◽  
Traditional Technologies ◽  
High Level

Blockchain and smart contracts are forming new systems to record and manage businesses with less need for intermediaries. The new systems are expected to offer high level of governance with lower cost as compared to the traditional technologies. While there is a continuous effort to apply this innovative technology in several businesses, Islamic finance in general—and Islamic social finance in particular—are facing few challenges that could be solved by such innovations. Islamic social finance institutions such as waqf are facing some challenges in enhancing its governance structure to ensure Shariah compliance as well as economic efficiency. This chapter explains how blockchain and smart contract technologies can help these institutions for better governance, lower transaction cost, more transparency, and higher trust, hence enhancing the business flexibility and market accessibility. It also presents some related cases that are currently under development as an evidence for the practicality of these technologies in the Islamic social finance arena.

scholarly journals Rational Protocols and Attacks in Blockchain System

2020 ◽  
Vol 2020 ◽  
pp. 1-11
Author(s):  
Tao Li ◽  
Yuling Chen ◽  
Yanli Wang ◽  
Yilei Wang ◽  
Minghao Zhao ◽  
...  
Keyword(s):  
Game Theory ◽  
Internet Of Things ◽  
Building Blocks ◽  
Emerging Technology ◽  
Economic Incentives ◽  
Research Progress ◽  
Smart Contracts ◽  
Future Directions ◽  
Smart Contract ◽  
Game Theoretic

Blockchain has been an emerging technology, which comprises lots of fields such as distributed systems and Internet of Things (IoT). As is well known, blockchain is the underlying technology of bitcoin, whose initial motivation is derived from economic incentives. Therefore, lots of components of blockchain (e.g., consensus mechanism) can be constructed toward the view of game theory. In this paper, we highlight the combination of game theory and blockchain, including rational smart contracts, game theoretic attacks, and rational mining strategies. When put differently, the rational parties, who manage to maximize their utilities, involved in blockchain chose their strategies according to the economic incentives. Consequently, we focus on the influence of rational parties with respect to building blocks. More specifically, we investigate the research progress from the aspects of smart contract, rational attacks, and consensus mechanism, respectively. Finally, we present some future directions based on the brief survey with respect to game theory and blockchain.

Enhancing trust through digital Islamic finance and blockchain technology

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Felicia Hui Ling Chong
Keyword(s):  
Environmental Impact ◽  
Design Methodology ◽  
Islamic Finance ◽  
Smart Contracts ◽  
Content Type ◽  
Blockchain Technology ◽  
Financial Technology

Purpose This paper aims to provide a reflective discussion on the different avenues of blockchain application in Islamic finance in promoting trust and transparency for increased accountability between parties involved in the delivery of Sharīʿah-compliant products and services. Design/methodology/approach This paper discusses on blockchain benefits in Islamic finance while providing an illustration with smart Sukuk. Having identified the advantages of the development of Islamic financial technology (i-FinTech), this study ends by debating a couple of challenges (computational codification of Sharīʿah principles and environmental impact) that have to be addressed to promote the development of a real sustainable Islamic FinTech. Findings This paper also identifies two challenges in using blockchain in i-Fintech. The first challenge refers to the extent to which Sharīʿah principles can be computationally encoded. Blockchain makes public all transactions that ease Sharīʿah compliance checks and determine if these transactions are Islamic in nature but this check can be done only after their operation. The second challenge is related to the algorithmic protocol used to validate smart contracts (including smart Sukuk). This situation calls into question the principles of Maqasid al-Sharīʿah according to which transactions should not harm society. Originality/value In the current debates related to the development of Islamic FinTech, this paper also identifies two challenges in using blockchain in i-Fintech.

scholarly journals Fintech In Malaysia: An Appraisal to the Need of Shariah-Compliant Regulation

2020 ◽  
Vol 28 (4) ◽  
Author(s):  
Muhammad Ilyas Ab Razak ◽  
Nur Akma Mohd Dali ◽  
Guru Dhillon ◽  
Azwina Wati Abdull Manaf
Keyword(s):  
Financial Services ◽  
Industrial Revolution ◽  
Islamic Finance ◽  
Related Activity ◽  
Traditional Practice ◽  
Finance Industry ◽  
Fourth Industrial Revolution ◽  
Potential Risks ◽  
Financial Behaviour ◽  
Financial Technology

The implementation of financial technology (Fintech) in the Islamic finance industry has created a totally new phenomenon of banking and financial behaviour for the stakeholders, particularly in Malaysia. As part of the financial revolution, the Islamic finance sector ought to embrace Fintech to diversify the services/products offered as the digitalisation process is taking place in the Fourth Industrial Revolution era. In order to safeguard the assimilation of the technology into the existing traditional practice of Islamic finance, Shariah-compliant regulation is, therefore, necessary for governing the potential risks associated throughout the process of financial activities. Hence, this paper intends to analyse the need for Shariah-compliant regulation to govern Fintech-related activity in the Islamic finance industry. The article emphasises the need from several aspects such as the non-comprehensiveness of the Islamic Financial Services Act (IFSA) 2013; the increasing rate of financial inclusion and; the qualifications of the Shariah Advisory Council’s (SAC) members in Malaysia. It also provides recommendations through the introduction of subsidiary legislation pursuant to IFSA; production of regulatory sandbox framework especially for Islamic Fintech firms; and emphasis on the importance of SAC members possessing knowledge in technological aspect in order to ensure the need for Shariah-compliant regulation in the Islamic finance industry is properly satisfied.

scholarly journals Blockchain Technology for Islamic Marriage Certificate

2018 ◽  
Vol 7 (4.11) ◽  
pp. 193 ◽  
Author(s):  
Nor Elysha Kamaruzaman ◽  
Ihsan Mohd Yassin ◽  
Azlee Zabidi ◽  
Fadhlan Hafizhelmi Kamaru Zaman ◽  
Zairi Ismael Rizman ◽  
...  
Keyword(s):  
Decentralized Control ◽  
Potential Application ◽  
Significant Risk ◽  
Disruptive Technology ◽  
Smart Contracts ◽  
Central Authority ◽  
Virtual Currency ◽  
Blockchain Technology ◽  
Smart Contract ◽  
Islamic Marriage

In recent years, an individual under the pseudonym of Satoshi Nakamoto devised a revolutionary technology called blockchain as the engine behind the first decentralized virtual currency called Bitcoin. A radical concept departing from government-centric controlled currencies, Bitcoin has emerged as a disruptive technology with the power to revolutionize business and its processes. Advantages of the blockchain include decentralized control, immutability, elimination of central authority and solution of concurrency problems in traditional databases. Leveraging on the advantages of blockchain technology defined above, this paper discusses the potential application of blockchain technology for storage of Islamic marriage certificates. Marriage certificates are documents issued to couples to legally recognize their marriage. Due to its paper-based nature, there is significant risk for them to be forged or frauded. These issues can be addressed effective using blockchain. The proposed application was implemented using smart contracts on a simulated Ethereum platform. A smart contract is designed to execute automatically under certain predefined conditions. The use of smart contracts eliminate manipulation by a single party. In addition, the immutable concept of blockchain ensures that data integrity is always preserved, greatly reducing the risk of fraud.  

scholarly journals Financial Technology in Islamic View

2020 ◽  
Vol 4 (2) ◽  
pp. 102-112 ◽  
Author(s):  
Taofik Hidajat
Keyword(s):  
Small Businesses ◽  
Profit Sharing ◽  
Islamic Finance ◽  
Inclusive Growth ◽  
Distribution Of Wealth ◽  
Mobile Payments ◽  
Finance Industry ◽  
Islamic View ◽  
Financial Technology

The development of financial technology made many changes, including Islamic finance. This paper reviews how fintech is changing the shape of the Islamic finance industry through mobile payments, microfinance, peer-to-peer lending, and crowdfunding. The use of e-wallet is as long as it does not violate the provisions. Microfinance cannot be separated from Islamic finance if we want to increase social welfare through inclusive growth and encourage the distribution of wealth. Islamic microfinance structure can deal with the problem of poverty. The appropriate and fair crowdfunding model for small businesses is profit sharing or using mudaraba contracts. In Islamic finance, the role of bitcoin is controversial.

General Takaful claims: An experience of Takaful operator in Malaysia

2017 ◽  
Vol 5 (4) ◽  
pp. 18
Author(s):  
Amirul Afif Muhamat ◽  
Mohamad Nizam Jaafar ◽  
Sharifah Faigah Syed Alwi
Keyword(s):  
Life Insurance ◽  
Islamic Finance ◽  
Rigorous Analysis ◽  
Finance Industry ◽  
General Insurance ◽  
Bright Side ◽  
Main Components ◽  
Islamic Insurance ◽  
Gathering Data ◽  
Observation Period

Takaful is interchangeably referred as Islamic insurance. In Malaysia, the takaful sector is part of the main components for Islamic finance industry. The business can be divided into two: general and family takaful. To ease understanding on this niche sector; general takaful is comparable to general insurance while family takaful is akin to life insurance with special reference needs to be given on the requirement of the business to adhere to the Islamic precepts. The main business in general takaful is motor takaful and this line of business is faced with high takaful claims. This study appraised the factors which affect the general takaful claims based on the experience of one takaful operator in Malaysia (the name of takaful operator is not disclosed due to confidentiality). The factors are: number of claims; fraud; and coverage for protection. The limitation of this study is that the observation period is only 10 years which limits rigorous analysis to be done. Nevertheless, previous studies in this area depict the same limitation – constraint in gathering data that has long observation period. On the bright side, the data in this study is still capable to produce meaningful results to be referred with regards to this issue – general takaful claims.

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