Abu Dhabi, UNITED ARAB EMIRATES – Abu Dhabi’s Al Hilal Bank has executed the world’s first sukuk transaction using blockchain technology, Reuters reported on 26th November.
A sukuk refers to an Islamic financial certificate, similar to a bond in Western finance, that complies with Islamic law. Since the traditional Western interest-paying bond structure is not permissible, the issuer of a sukuk sells an investor group a certificate, and then uses the proceeds to purchase an asset, of which the investor group has partial ownership.
Al Hilal Bank has partnered with FinTech firm Jibrel Network to pilot the first Shariah-compliant purchase and settlement sukuk transaction using blockchain technology. The partnership was made possible through the Plug and Play ADGM innovation platform, where financial institutions in the MENA region can accelerate their digital transformation agenda by connecting with FinTech startups locally and globally.
According to Reuters, the bank has used the blockchain to “sell and settle in the secondary market as a small portion of its US$500 million five-year sukuk” which had been issued in September.
CEO of Al Hilal Bank Alex Coelho 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 partnership between Al Hilal and UAE incubated startup, Jibrel, highlights ADGM’s success in attracting, nurturing and fostering innovation.”
While this understandably marks a historic first for Islamic finance, in late August the World Bank issued the world’s first public bond worth US$73 million on the Ethereum network. Blockchain technology is expected to simplify issuance and trading, and also improve regulatory oversight.