Al Hilal Bank is the first Islamic bank in the world to use blockchain technology for the resale and settlement of an Islamic sukuk, a type of bond that generates returns without interest. Blockchain was used to transact a secondary market deal in Al Hilal Bank’s $500 million senior sukuk maturing in September 2023. This was the first time that blockchain has been used worldwide to execute a Sukuk transaction.
Islamic Sukuk have been successful and one of the fastest growing asset classes with $97.9 billion worth of Sukuks issued in 2017, representing a 50% increase from 2016. Al Hilal Bank is aiming to transform the sukuk market by embracing blockchain and integrating it into their infrastructure, paving the way for innovative digitized Islamic sukuks.
These “smart sukuks” will provide transactional efficiencies and significantly reduce the bloated overheads associated with issuing and settling Islamic sukuks. In addition, by using smart contracts to oversee the enforcement of Shariah compliance, Al Hilal Bank is confident that operational efficiencies and automation benefits can be delivered, according to a company statement.
Al Hilal Bank’s CEO, Alex Coelho, said in a statement: “The advantages of using smart contracts range from safer transactions with robust Shariah compliance, to the unlocking of new opportunities. The partnership between Al Hilal Bank and UAE incubated startup, Jibrel, highlights ADGM’s success in attracting, nurturing and fostering innovation.”
Abu Dhabi Global Market (ADGM) is an international financial centre and has three independent authorities – The Financial Services Regulator, The Registration Bureau and The Courts. The initiative is the result of the collaboration of Al Hilal Bank Digital Transformation team with Jibrel Network, a UAE-based fintech.