First Shariah-compliant Bond Worth $500M Settled on Blockchain by Abu Dhabi Bank

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Photo: Al Hilal Bank / Facebook

Photo: Al Hilal Bank / Facebook

Though traditional banks have been already actively joining the blockchain community for a comparatively long time, Islamic banks that build their work in compliance with Sharia principles used to stay aside from the newly developing trends. Nevertheless, Al Hilal Bank, based in Abu Dhabi, has changed the game.

First Sukuk Transaction

The UAE-based Islamic Al Hilal Bank has announced that it has managed to complete “the world’s first Sukuk transaction” with the help of blockchain technology. Sukuk represents itself a legal instrument and is also known as “sharia compliant” bonds. This tool enables investors to receive returns from their funds without breaking Islamic law.

Al Hilal Bank, which is an investment arm of the Abu Dhabi government, has entered in a partnership with a UAE-based fintech company called Jibrel Arrange to settle the first Islamic $500 million bond on the secondary market utilizing blockchain tech. It is also known that it is a five-year Sukuk that is maturing in September 2023.

The partnership between the bank and the fintech firm was achieved via the innovative platform created by Abu Dhabi Global Market to ensure cooperation between financial institutions in the region and fintech startups.

This collaboration is a real milestone for the Islamic banking system. Blockchain has never been used before to execute a Sukuk trade operation.

Bank’s Vision

According to the bank, their main aim is to revolutionize the Sukuk market with the help of blochckain. Namely, such tech innovations have a possibility to transform this market infrastructure with a view to ensure faster and more efficient transactions and to decrease their costs.

Speaking about their new achievement, Alex Coelho, CEO of Al Hilal Bank, said:

“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.”

Islamic Sukuks are considered to be one of the fastest developing asset classes. In 2017 the bonds were offered for $97.9 billion which means a 50 percent growth in comparison with 2016.

Blockchain and Banking

This summer, after winning a mandate from the World Bank the Commonwealth Bank of Australia (CBA) has delivered the first ever bond transaction using blockchain.

The main idea behind the initiative was to apply blockchain with a view to improve the interaction with debt capital market intermediaries and agents, simplify processes of funds raisings and securities trading as well as to enhance operations and increase regulatory control.

The result of the transaction has exceeded all the expectations. As Coinspeaker has reported, the first ever blockchain-based bond has raised $110 million.

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