Jubran Siddique, Founder and CEO at Zaryah Investment Company.
While I have previously written about the potential of asset tokenication in Islamic finance in a more general sense, I believe this fusion can specifically contribute to the United Nations’ sustainable development goals (SDGs). As the founder of an investment company that prioritizes both ethics and blockchain integration, this is an especially relevant topic for me.
Islamic Finance And Blockchain
Islamic finance as a whole emphasizes risk-sharing, asset-backed transactions and ethical investing. These all easily align with sustainable development. Because of the nature of this form of finance, I believe that advances in this sector can help address global challenges like poverty, inequality and environmental degradation.
As a part of these advances, blockchain technology can amplify the impact of Islamic finance on sustainable development. By using blockchain, we can revolutionize financial transactions, democratize access to financial services and foster accountability and trust in the financial ecosystem.
Harnessing Blockchain For Sustainable Development In Islamic Finance
There are a few ways I see blockchain transforming the Islamic finance sector to promote sustainable development:
• Microfinance and financial inclusion. I see blockchain technology facilitating Shariah-compliant microfinance services. Tokenization of microfinance transactions can lower transaction costs, increase efficiency and broaden financial services’ reach.
• Green sukuk. Blockchain can support the issuance and trading of green sukuk, Islamic bonds for environmentally friendly projects. When these bonds are tokenized it can enhance their liquidity, making them more attractive to investors and driving increased funding for sustainable development initiatives.
• Zakat and sadaqah. The efficiency and transparency of zakat and sadaqah (forms of charitable giving in Islam) can be improved by Blockchain. Like with sukuk, these transactions can be tokenized, thereby ensuring that the funds are swiftly and accurately distributed to people who need them—supporting efforts to reduce inequality and promote social justice.
Tackling The Roadblocks
While I think integrating blockchain with Islamic finance holds immense potential for sustainable development, it’s crucial to acknowledge and strategically address the roadblocks that may arise:
• Upholding Shariah compliance. In to make sure you are in compliance when bringing in new technology, I recommend forming a think-tank comprising of Islamic scholars proficient in fintech and digital finance. This group can work continuously to review and guide the development of blockchain applications, ensuring they are in harmony with Islamic law.
• Navigating regulatory frameworks. Also make sure to take a proactive stance with regulatory bodies and look to contribute to the development of regulations that accommodate the unique nature of blockchain applications
• Establishing trust. You can also go beyond forging partnerships with established Islamic financial institutions and consider creating educational programs and awareness campaigns about blockchain-based financial services.
The Road Ahead
I believe that the merging of Islamic finance and blockchain industries presents an unprecedented opportunity to accelerate progress toward sustainable development goals. By tapping into the potential of these two powerful sectors, we can create a more inclusive, equitable and sustainable global economy.
While we are only beginning to scratch the surface of what this convergence can achieve, the early signs of it are promising. As we continue to evolve, innovate and adapt, we can drive meaningful change and make significant strides toward a future where sustainable development is not just a goal or dream but a reality.
By leveraging the ethical principles of Islamic finance and the disruptive potential of blockchain, we can address some of the world’s most pressing challenges and create a more equitable and sustainable future. As we embark on this journey, we must continue to innovate, collaborate and strive for inclusivity, ensuring that all share the benefits of this convergence.
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