Blockchain for Islamic Social Responsibility Institutions

Blockchain for Islamic Social Responsibility Institutions

Moutaz Abojeib (ISRA, Malaysia) and Farrukh Habib (ISRA, Malaysia)
Copyright: © 2019 |Pages: 20
DOI: 10.4018/978-1-5225-7805-5.ch010

Abstract

Blockchain and smart contracts are forming new systems to record and manage businesses with less need for intermediaries. The new systems are expected to offer high level of governance with lower cost as compared to the traditional technologies. While there is a continuous effort to apply this innovative technology in several businesses, Islamic finance in general—and Islamic social finance in particular—are facing few challenges that could be solved by such innovations. Islamic social finance institutions such as waqf are facing some challenges in enhancing its governance structure to ensure Shariah compliance as well as economic efficiency. This chapter explains how blockchain and smart contract technologies can help these institutions for better governance, lower transaction cost, more transparency, and higher trust, hence enhancing the business flexibility and market accessibility. It also presents some related cases that are currently under development as an evidence for the practicality of these technologies in the Islamic social finance arena.
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Background

There are various Islamic social finance institutions proposed by the Islamic law which always played a pivotal role of sustainable economic development in a Muslim society throughout the history of Islam. The whole social ecosystem was an integral element of the financial empowerment program of the people which actively contributed in the financial inclusion, poverty alleviation and fruitful mutual community initiatives. However, recently, such important institutions have been generally failed to produce substantial impact within the Muslim society. Part of this problem is due to the challenges and issues faced by such institutions. Whereas another part of the problem lies in the fact that the commercial aspect of Islamic finance has captured most of the academic and professional attention at the expense of the Islamic social finance. One can easily notice the dearth need of quality academic literature in the topic from technology perspective.

The Islamic social finance institutions comprise of zakat, sadaqat, waqf and qardh hasan proposed by the Islamic law. A brief description of each of these institutions is given for a better understanding of the readership.

<i>Zakat</i></div><p><i>Zakat</i> is the transfer of ownership of a specific amount of money (or property) from someone who meets the certain criteria for the zakat to be obligated up on him/her to someone who deserves it by fulfilling certain criteria (Al-Jaziri, 2009). It is a form of obligatory charity; and one of the five pillars of Islam. Due to its importance, it is mentioned thirty-two times in the <i>Quran</i>. The beneficiaries of zakat consist of eight categories including poor and needy. The criteria for individuals to be beneficiaries of zakat is well-identified in Shariah.</p></div></div><div id="table-of-contents"><h2>Complete Chapter List</h2><div class="search-contents"><span class="text"> Search this Book: </span><span class="text-box-container"><input id="txtKeywords" type="text" maxlength="50" onkeypress="return SearchBookFulltextHandleEnter(event, 210216);" placeholder="Full text search terms" title="Full text search terms" class="full-text-search-box" /></span><div class="inline-block search-contents-xs-full-width"><span class="search"><span class="search-button" onclick="RemoveSpecialCharacters();SearchBookFulltext(210216);"></span></span><span class="reset"><span onclick="RemoveSpecialCharacters();SearchBookFulltextReset();" class="link-gray-s">Reset</span></span></div></div><div id="searchResults"></div><div id="full-toc"></div><div id="loading-toc" class="text-align-center"><div class="loading-icon-lg"></div></div><script type="text/javascript"> $(document).ready(function () { var bookId = 210216; 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