Abu Dhabi's Al Hilal Bank executes blockchain-based transaction Sharia-compliant bonds

Abu Dhabi-based Al Hilal Bank has become the first Islamic bank to execute the resale and settlement of an Islamic Sukuk using blockchain technology, MENA Herald reported.

The bank partnered with Jibrel Network, a UAE-based fintech firm, for the project.

Using blockchain technology, the bank sold and settled its $500 million Senior Sukuk maturing in September 2023 in the secondary market. This marked the first time that a Sukuk transaction was executed using blockchain.

“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,” Al Hilal Bank’s CEO, Alex Coelho, said.

According to Investopedia, a sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia — Islamic religious law. Islamic Sukuk is a fast growing asset class – in 2017, $97.9 billion worth of Sukuks were issued, representing a 50 percent increase from 2016.

Al Hilal Bank is embracing blockchain technology to transform the Sukuk market and make the way for digitized Islamic Sukuks or “Smart Sukuks”, which will help improve transactional efficiencies, while reducing the bloated overheads associated with issuing and settling Islamic Sukuks.

By leveraging smart contracts to oversee Sharia compliance, the bank said that it is confident that operational efficiencies and automation benefits can be delivered.