Application of blockchain information technology in Sukūk trade

• Main Authors: Busari, Saheed Abdullahi, Aminu, Sikiru Olanrewaju
• Format: Article
• Language: English; English
• Published: Emerald Group Holdings Ltd. 2021
• Subjects: BPH437 Sukuk - Islamic Bond; BPH72 Economic development. Growth. Sustainable development. Sustainability
• Online Access: http://irep.iium.edu.my/92097/1/10-1108_JIABR-10-2019-0197.pdf; http://irep.iium.edu.my/92097/7/92097_Application%20of%20blockchain%20information%20technology_SCOPUS.pdf; http://irep.iium.edu.my/92097/; https://www.emerald.com/insight/search?q=Application+of+Blockchain+information+technology+in+Sukuk
• Institution: Universiti Islam Antarabangsa Malaysia

Abstract Purpose – This study aims to explore the opportunities and challenges in activating a Smart Contract to enhance the efficiency and effectiveness of Sukūk offerings in the Islamic capital market. Design/methodology/approach – The study adopts a mono-method qualitative approach. Data were obtained from survey interviews of two issuances on the fusion of smart contracts in Sukūk structures that were Sharīʿah-compliant. A thematic approach was further used to analyze the interview data based on the onion research method while opportunities and challenges of activating the Smart Sukūk (SS) relied on doctrinal evidence. Findings – The results from the issuances across two jurisdictions showed that deployment of SS can resolve contractual ambiguities arising from Sharīʿah interpretations, jurisdictional policies and legal regime issues, which affect Sukūk origination and issuances especially on the right of investors in the event of � Sukūk defaults. Although SS is automated, the third party’s presence is not eliminated as the blockchain platform still relies on the validators who are usually blockchain developers functioning as a third party in the Sukūk chain. Research limitations/implications – The study relies on doctrinal literature to explain the features and requirements of SS. The empirical approach is limited to interview data based on local SS issuances. Future studies need to explore regulators’ role and global standards in cross-border issuance of SS with multiple jurisdictions/laws. Practical implications – The paper concludes that the offering of SS using local currency has been successful in the two issuances because of the facilitative regulatory environment. However, addressing Ṣukūk's challenges in cross-border offerings would require guidance from international standard-setters such as the Accounting and Auditing Organization for Islamic Financial Institutions and the Islamic Financial Services Board. Originality/value – This study is an advanced application of smart contracts to alleviate the related Sukūk challenges in the Islamic capital market.