In an unprecedented development, Al Hilal Bank has become the first Islamic bank to execute the resale and settlement of an Islamic Sukuk using blockchain technology. The bank strives to transform the Sukuk market by integrating its infrastructure with blockchain technology, thereby paving the way for innovative digitized Islamic Sukuk.
Sukuk is an Islamic financial certificate that allows Islamic investors to generate returns in compliance with Shariah—Islamic religious law. Islamic Sukuk is a rapidly growing asset class. In 2017, $97.9 billion worth of Sukuks were issued, representing a 50 percent increase from 2016.
According to Reuters, Al Hilal Bank has used the distributed ledger technology (DLT) to sell and settle in the secondary market a small portion of its $500 million Sukuk maturing in September 2023. The Abu Dhabi-based bank has partnered with Jibrel Network, a Switzerland-headquartered fintech firm, for this pilot project. The deal was reportedly sold by Al Hilal to a private investor at $1 million.
The partnership between Al Hilal Bank and Jibrel Network was made possible through the innovative Plug and Play platform of the Abu Dhabi Global Market (ADGM). The ADGM is an international platform where financial institutions from the Middle East and North Africa (MENA) region can network with FinTech startups locally and globally, and thus catapult their digital transformation agenda.
Al Hilal Bank is collaborating with Jibrel Network to promote the adoption of DLT for the Islamic finance sector under the supervision of the Financial Services Regulatory Authority (FSRA) of the ADGM. “The partnership between Al Hilal and UAE incubated startup, Jibrel, highlights ADGM’s success in attracting, nurturing and fostering innovation,” remarked Coelho.
On this, Talal Tabbaa, Co-founder of Jibrel stated, “We will be able to provide Islamic financiers with the necessary tools to facilitate Islamic agreements with the same speed, volume, and efficiency experienced in conventional finance, and potentially develop new digital asset classes that were previously unimaginable.”
Al Hilal Bank maintains a very positive stance towards blockchain technology. It firmly believes that it blockchain will help improve operational efficiencies while reducing the bottlenecks associated with issuing and settling Islamic Sukuks. And at the same time, enhance regulatory oversight.
On the development, Alex Coelho, CEO of Al Hilal Bank said, “We are proud to be the first bank to launch a ‘Smart Blockchain Islamic Sukuk; once again the bank has demonstrated that it has the capabilities of leading in the competitive market of Islamic banking. The advantages of using smart contracts range from safer transactions with robust Shariah compliance to the unlocking of new opportunities.”