Blockchain for Islamic banking -

Blockchain for Islamic banking

March 8, 2021

Blockchain offers an ideal framework for Islamic Finance products with prepaid and real-time audited transactions removing underlying risks.

Islamic banking presents a unique approach often in conflict with the pre-sets of the western banking systems. The difference in approach has several benefits – but require careful structuring if a bank wishes to offer its market Sharia compliant investment and credit products that are comparable to those in the west. Blockchain technology is decentralised, which directly challenges ideas like central counter-party and intermediary roles that lead to more predictable and fixed risk fundamentals – an approach that is mirrored in Sharia law.

Blockchain technology then, thanks to the decentralised foundation, lowers the cost and effort to deploy more sophisticated financial systems than ever before, while ensuring easy and even increased compliance with Sharia law – as blockchain products start out compliant, with support to add complexities on top to mirror the role of western financial products, where traditional financial systems in contrast are designed from the ground up to have variable interest rates, changing debt instalments, and produce other outcomes that are unacceptable “gharar” (uncertainty) under Sharia law.

Thus, in traditional systems new rules have to be built to restrict existing platforms to service Sharia products, where blockchain products require no such restriction.


  • Increased and validated adherence to Sharia law across the board
  • Reinforced general rules and guidelines underpinning Sharia law in particular – honesty, transparency, good ethics, trustworthiness and reliability
  • Access to cloud storage
  • Reduced costs of Islamic banking and finance – easier management and control, reduced backend costs of Sharia law compliance compared to other methods of banking
  • Zakat – charitable donations calculated, collected, impact recorded, feedback to people contributing. Increased transparency and accountability, reduced costs, frictions, loss, corruption. Increased impact due to higher efficiency and effectiveness of programs
  • Waqf – very similar to operation of blockchain – improved efficiency
  • Takaful – Islamic insurance – less fraud due to smart contracts – more efficiency and cost saving, quicker settlement
  • Easier automation and processing of micro-insurance in efficient and cost-effective manner
  • Reduced gharar (uncertainty), fraud, and risk for all parties
  • Low ujr – transaction fees can be lower due to less friction and costs
  • Limitless opportunities to create financial products unique to Islamic systems, less reliance on western banking processes
  • Less costs related to converting from a Western system based on interest
  • Less costs related to investigating nature of businesses – if tracked on blockchain
  • Easier application, reporting, supervision, authorisation and accounting of loans and other services, in accordance with Sharia law
  • Easier tracking of funds
  • Increased accessibility to banking might reduce informal and black markets


We pride ourselves on being able to build bespoke and regulatory compliant networks in accordance with our clients’ needs. One of the areas of focus for us has been Islamic banking and Sharia Law compliance.

We partner with governments and banks to bring a customised solution, depending on the specific requirements and laws, that facilitates the interoperability with emerging and existing systems.

We help partners leapfrog outdated platforms by integrating and implementing systems based on blockchains and smart contracts to create a model for an independent financial future, without prejudice.