Blockchain-based Impact Sukuk
Dr Hazik Mohamed
Stellar Consulting Group, Singapore
Abstract
There has been increasing attention on sustainable practices and in particular in financing socially-responsible projects through impact investment. The focus of these impact investment financing has been on performance-driven risk-sharing in order to ensure accountability to the execution of the program according its initial intention. We feel that this should not only be limited to impact investments but also in every substantial investment that is being made. In this paper, we recommend putting sukuk and bonds on the blockchain to enable transparency and put forth steps to automate cumbersome processes in sukuk/bond issuances in order to reduce costs and improve efficiency. We leverage similarities and discuss significant advantages of using technology to operationalize accountability and instil confidence in properly structured and executed financial instruments. We make these recommendations on the basis of fulfilling a gap in sustainable practices, through impact-focussed sukuk and bond issuances.
Keywords: asset-backed financing, decentralized credit rating, risk-sharing instruments, sustainable finance, trust tokens
Topic: Islamic Capital Market