Islamic Research and Training Institute to adopt Blockchain-based Islamiic finance platform

The Islamic Research and Training Institute (IRTI) of the Islamic Development Bank (IsDB) Group has partnered with the Samsung-backed Blocko to build a Blockchain-based innovative credit enhancement system.

IRTI works to develop innovative knowledge-based solutions and enhance human capacity in Islamic economics and finance for the sustainable development of IsDB member countries and Muslim communities in non-member countries worldwide, while Abu Dhabi-based E24P is a collective of technology experts, distributed financial services providers, state-level government sponsors, and leading research institutes in the UAE and the UK working with clients in high-growth economies and sectors across the Middle East, Africa and Southeast Asia to deliver solutions in disruptive technologies.

The IRTI-E24P partnership aims to leverage the E24P Blockchain teams' deep expertise in deploying Blockchain systems to further the IsDB's mission of enabling greater financial inclusion, alleviating poverty, and accelerating the development of the Islamic financial industry.

Shari'ah law prohibits banks from charging interest on loans to their borrowers. Islamic banks offer financing to individuals and businesses through real economic transactions such as joint ventures, deferred sale, and leasing agreements. In offering credit financing, Islamic banks need a mechanism to encourage debtors to pay on time. A common practice involves charging debtors with late fees which are then donated to charity.

However, because Islamic banks are not allowed to incur any profit and in turn any benefit from these late-payment charges, they are not incentivised to collect these fees and distribute them to charitable organisations in a timely manner. At the same time, because debtors see these late fees as an act of charity, their sense of urgency to pay their debt obligations on time might diminish.

The Smart Credit Management System minimises the risks associated with credit financing to businesses and consumers through the use of new economic incentive models and advanced implementations of hybrid Blockchain technology. The new system being developed by IRTI and implemented jointly by IRTI and E24P will feature a novel incentive mechanism that encourages early repayment and contributes fees to an insurance pool that covers involuntary credit defaults. Such a system is not feasible through conventional arrangements but is facilitated through Blockchain technology, specifically smart contracts on the Aergo Blockchain.

Highlights of the Smart Credit Management System include:

- Ensuring that credit assessments are performed in a provably transparent and responsible manner, whilst keeping the data and methodology used appropriately secure and confidential based on zero-knowledge proofs.

- Allowing creditors to reduce credit default rates to improve overall business performance and accelerate efforts in areas of financial inclusion.

- Integrating siloed functions in the financing process including credit reporting, credit rating, credit history, and credit insurance to reduce costs and improve efficiency.

- Acting as an extensible architecture that can allow multiple banks to collaborate on a consortium network to manage credit and insurance in a decentralised, autonomous, and strictly-governed way.

"The Islamic finance market is growing rapidly, with projections of a rise from around US$2 trillion to an impressive US$3.78 trillion by 2022. Yet certain technical and economic challenges have prevented the industry from truly flourishing," said Dr Sami Al-Suwailem, Acting Director General of IRTI.

"Our new partnership with E24P aims to address this need by providing the infrastructure needed for the Islamic financial industry to deliver critical services to both the developed and developing world."

IRTI partnered with E24P because many Blockchain projects fail to move past the initial proof-of-concept (POC) stage due to a lack of end-to-end systems design knowhow that is coupled with practical implementation of Blockchain technology in complex industrial environments. The E24P team has the advantage of having already deployed over 38 large-scale private and government blockchain solutions, and this execution intelligence is needed to bypass cost, draw out POCs to fast track to business value implementations.


Phil Zamani, CEO of E24P, said: "We are honoured to be working with IRTI to help them deliver a truly unique solution that has the potential to have a significant impact on the Muslim world. The implementation of Blockchain systems in complex processes like credit and insurance has long been sought after by financial institutions around the world. Forward-thinking GCC countries, such as the UAE and Saudi Arabia, have been especially progressive, implementing Blockchain projects to accelerate their digital transformation agendas and smart city innovation strategies."

The Islamic Development Bank (IsDB) Group is a multilateral development bank with over US$50 billion in assets under management, operating in over 57 member countries across Europe, Asia, and Africa. The IsDB works to promote shari'ah-compliant financing structures in Muslim countries, develop technology and innovation solutions that align with UN Sustainable Development Goals, build partnerships between the private and public sector, facilitate greater degrees of skills and knowledge sharing among member countries, and foster collaboration between nations to support sustainable development.

Blockchain to be a hot topic at GIES 2018

• Summit sessions will examine how creating Blockchain solutions can benefit Islamic banks

• Fourth edition of high-level summit to be held on October 30-31

Blockchain and cryptocurrencies are reshaping the global Islamic banking sector, and leading shari'ah-compliant banks are using disruptive technologies to create new financial products, according to industry experts who will gather in Dubai, UAE for the fourth Global Islamic Economy Summit (GIES) on October 30 and 31 2018.

Dubai Chamber of Commerce and Industry and the Dubai Islamic Economy Development Centre (DIEDC) are organising the summit in cooperation with strategic partner Thomson Reuters. GIES 2018 will be held under the patronage of HH Sheikh Mohammed bin Rashid Al Maktoum, VP and PM of the UAE and Ruler of Dubai.

GIES 2018 will feature panel discussions on the Internet of Things (IoT), drone technology and artificial intelligence (AI). The sessions will provide case studies of pioneering Islamic financial services firms, such as Onegram, a UAE-based startup specialising in shari'ah-compliant cryptocurrency, Malaysia’s Hada DBank, the world’s first Blockchain-powered Islamic Bank, and Emirates Islamic Bank, which has integrated Blockchain into cheque processing.

HEMajid Saif Al Ghurair, Chairman of Dubai Chamber and Board Member of DIEDC, said: “With the adoption and interest in Blockchain growing among Islamic banks around the world, it is the right time to shed light on recent developments in this space and examine the benefits and value that disruptive technologies can deliver to industry players and consumers alike.”

HE described Dubai as a leading example of how public and private sector entities can collaborate to accelerate innovation in the Islamic banking sector, and added the summit will provide a platform to share knowledge and industry best practices.

HE Abdulla Mohammed Al Awar, CEO of DIEDC, said: “With the support of its strategic partners, DIEDC has made significant headway in positioning Dubai as the global capital of Islamic economy. Building on the success of previous editions, we are confident that GIES 2018 will amplify this momentum, fuel the conversation, and deepen our insights into key trends that are driving change within the Islamic economy.”

Al Awar added: “Technology is a major catalyst for innovation across industries, and Islamic economy is no exception. With smart solutions resulting in a surge of disruptions, especially across the Islamic banking and finance landscape, we are poised for a paradigm shift. For instance, technologies such as Blockchain that are still in a nascent stage of evolution, provide new opportunities to reduce systemic risks and ensure a decentralised, inclusive and transparent financial ecosystem that does away with legacy systems and removes layers of intermediation.”

Details:

To be held under the theme A Shared Future, GIES 2018 is expected to welcome more than 3,000 attendees. The third edition of the Global Islamic Economy Summit, held in 2016, attracted nearly 2,500 dignitaries, officials and business leaders from 74 countries.

Explore:

Read the Suroor Asia blog post on new sharing sessions at GIES

Hashtag: #GIES2018

Dubai government announces AI-backed charity and fatwa projects

As part of its contribution to the Dubai 10X initiative, which aims to place Dubai, UAE 10 years ahead of other cities, the Islamic Affairs & Charitable Activities Department, in corporation with Dubai Future Foundation, has developed two artificial intelligence (AI) projects - the Virtual Charity Foundation and Virtual Ifta.

Through the two projects, the Department seeks to create a flexible and intelligent environment to enhance charitable activities; strengthen the Department's efforts to deliver and document fatwas; and serve the community through innovative services.

The projects are two among several Dubai 10X proposals launched by HH Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, Chairman of The Executive Council of Dubai and Chairman of DFF’s Board of Trustees, at the 6th World Government Summit held in Dubai in February 2018.

HE Dr Hamad bin Al Shaikh Ahmed Al Shaibani, Director General of the Islamic Affairs & Charitable Activities Department, said: "As part of its participation in the Dubai 10X initiative, the Department has developed interactive smart platforms using advanced artificial intelligence technologies to enhance philanthropy and create a new method for delivering fatwas. These projects are in line with the Dubai government’s objective of promoting innovation in all sectors to enable Dubai to establish global leadership in shaping the future.”

The Virtual Charity Foundation is the world’s first charity institution that allows donations to be routed directly from donor to beneficiary with the use of AI and Blockchain technology. The global charity platform utilises Blockchain and AI to facilitate direct communication between the donor and beneficiary, thus eliminating the need for counterparties and significantly reducing waiting periods for the beneficiary. The initiative aims to protect the identity of beneficiaries as well as open new ways for community groups from around the world to search and identify charitable aid opportunities. Beneficiaries may also submit cases for review remotely, through AI applications.

The second initiative, Virtual Ifta, uses AI-backed decision-making and big data to streamline the process of disseminating fatwas. Fatwas are rulings by authorities on points of Islamic law. Virtual Ifta aims to facilitate a more instant experience and reduce duplications by removing the need for muftis to answer for the same questions repeatedly. The platform also allows muftis to instantly answer a vast range of queries posed by millions of people around the world.

Bank AlJazira adopts Blockchain fraud prevention solution

ShoCard, systems integrator Ateon and KSA Islamic bank Bank AlJazira are working to launch a first-of-its-kind fraud prevention platform using ShoCard's Blockchain-based identity management solution and SettleMint's know your customer (KYC) technology.

Expected benefits of the system once deployed include:

• Reduced cost and duplication for identity management 
• Reduced fraud, as a borrower can no longer take a loan against the same asset from multiple banks 
• Allowance for the exchange of customer information such as data on wire transfers and investigatory reports
• Improved management of anti-money laundering (AML) 
• Improved customer satisfaction

ShoCard has an open-patent portfolio with technology that can be used for password-less login. As user credentials are not stored on any computer, no personal or financial data is exchanged during transactions, eliminating data and identity theft and resulting in fast, trusted authentications.

Emirates Islamic adopts Blockchain to secure cheques

Emirates Islamic, an Islamic financial institution in the UAE, said it will introduce Blockchain technology into its cheques as a fraud prevention measure.

Termed Cheque Chain, Emirates Islamic is the first Islamic bank in UAE to undertake this initiative to enhance security in the popular payment method. Emirates Islamic will issue new cheque books carrying a unique QR code on every leaf, along with a string of 20 random characters.

“Blockchain has the potential to significantly increase security and protection in banking transactions and we are delighted to be among the first in the UAE to utilise this new technology,” said Suhail Bin Tarraf, COO, Emirates Islamic. “We anticipate that Cheque Chain will dramatically reduce cheque frauds in this market helping us provide our customers greater peace of mind and security.

“Emirates Islamic is making deeper investments in digital technologies to enhance and improve the banking experience, as part of our commitment to support the vision of HH Sheikh Mohammed Bin Rashid Al Maktoum, VP and PM of UAE and Ruler of Dubai in making Dubai the global capital of Islamic economy. We are confident that our efforts will be well received by our customers and partners.”

In the next phase of the Cheque Chain project, the bank will have each cheque leaf registered on the Bank’s Blockchain platform, enabling it to validate the authenticity of the cheque at source.

Fintech and traditional bank partnerships are a win-win

• Remittances identified as key sector for fintech companies
• Dubai praised for embracing Blockchain and other technology

Fears of an imminent disruption to traditional banking from the financial technology sector are overblown, with a collaborative approach being the most likely way forward, according to experts at the Global Islamic Economy Forum (GIES) being held in Dubai, UAE.

Zubair Ahmed, Head of IT & Business Innovation at Emirates Islamic Bank, said: “The good things about fintech companies are speed and customer focus, yet the cons are they are not widely regulated. Increasingly, the relationship between banks and fintech is being seen as a much more complementary and collaborative one than competitive.”

He added that opportunities exist for fintech in innovations such as digital currencies and Blockchain. “The fintech revolution cannot be done by a single bank, but a single bank can create a new norm,” he said. “The good thing is that here in the UAE, we have a great body of federation banks which gives input to UAE Central Bank and has such discussions. Dubai government’s vision of using Blockchain I think will really help the ecosystem and third parties.”

Abdul Haseeb Basit, CFO of the UK’s Innovate Finance, agreed that a collaborative approach is most likely. “The challenge for startups is regulation. Fintech realises that regulation is where banks have an advantage, while (banks) also have the ability to access a wide customer base. Banks already have that scale so it makes sense for fintechs to partner with them rather than market on their own.”

He also agreed with Zubair that Dubai’s focus on Blockchain could be a game-changer. “Dubai’s government aspirations to be a Blockchain government are huge. Having a system where you can track and log all transactions is a great step forward. In most cases using applications which already exist actually makes financial transactions and processes cheaper and faster."

Basit identified remittances as the next big thing. “I think (remittances are) where we could see the next unicorns* in fintech,” he said. “Companies who specialise in this can come here and capture market share.”

Abdulla Al Najran, Deputy CEO, Boubyan Bank, Kuwait, said banks should view fintechs favourably. “Banks must work with fintechs as they have ideas that the older generation will not come up with. We are also working with the regulator and bringing new ideas to the table," he said.

“Non-traditional customers are choosing to go with shari'ah-compliant products and Islamic banks because of the transparency and now the technology. Technology and fintech can help Islamic banks broaden their customer base.”

David Martinez de Lecea, Specialist Consultant, FinTech, Roland Berger in the UAE said: “Regulation is the biggest challenge. We have an invested in products that are better than others but it takes six to eight months to roll them out. We are developing great solutions for customers that lower cost and improve access but the regulatory side is still looking at models that were developed two years ago. This process needs to move faster.”

He added that Dubai is successfully positioning itself at the nexus of finance and technology. “The most groundbreaking things we are going to see in the next years are artificial intelligence technology, future accelerators and initiatives launched in Dubai – very exciting things are happening here and it’s going to become the next global capital of the Islamic world,” he said.

Hashtag: #GIES2016

*A unicorn is a startup which does not yet have a track record but nevertheless is valued at US$1 billion or more.