The Future of Blockchain is Islamic Finance
To date, the impact of blockchain is Islamic finance has been limited. Not because the core principles do not align, but primarily because there are still a lot of unanswered questions regarding the technology. Interconnecting financial accessibility is one of the priorities the United Nations aims to pursue. Major progress is to be expected by 2030 at the latest.
Financial inclusion remains a big problem on a global scale. It is difficult to find service providers catering to the global human race. Solving that problem may be a lot more difficult than assumed, It is a key step toward ending poverty once and for all. To date, billions of people still live on less than $2 per day,
As such, new opportunities need to be explored. In the Islamic world, money has a different appeal compared tot he Western world. It’s more a social tool rather than a financial one. One of the core principles in Islamic finance is to distribute wealth efficiently. The use of blockchain technology can play a key role in this regard.
Overcoming Key Challenges in Finance
Exploring beneficial ventures involving blockchain is a difficult opportunity to pursue. Key challenges will need to be overcome. Its decentralized nature is of great value to address the lack of transparency first and foremost. It also provides insights as to where money comes from and how it is used effectively.
For now, the International Centre for Education in Islamic Finance is still building the necessary infrastructure. It is expected this blockchain application will highlight the potential of distributed ledgers. Network nodes will record all transactions and recipients will be notified of incoming transactions. In doing so, this solution may gain more trust in the Islamic finance industry.
Another technology being explored comes in the form of smart contracts. This technology is being tested in an Islamic bonds pilot program. In the long run, Blossom Finance hopes to use smart contracts to automate the issuance of these bonds in the future. Other blockchain-related projects are currently in development as well. This further shows the future of Islamic finance and blockchain may be closely entwined.