Blockchain and Islamic Finance

Abstract

In Morocco, the Islamic finance sector has developed at a slower pace than expected. On the other hand, COVID-19 has shown that Islamic finance brings real added value to clients in times of crisis. Next year will be decisive for the existing players to reach the break-even point to ensure their continuity and sustainability.

Digitization and blockchain can therefore support and ensure compliance of Islamic finance transactions, enabling millions of people to access finance. This contributes to the growth of the sector, greatly improves the efficiency of transactions, and enhances financial inclusion. Indeed, DLT technology enables greater portability of products and services by improving the level of authenticity of data stored on the blockchain. Therefore, this technology significantly increases the reach of Islamic financial services.

In general, Islamic finance represents a large and growing part of the global economy. Over the past decade, the FinTech revolution has influenced how innovations in Islamic finance emerge. While these innovations are primarily related to product delivery and user interface or experience, it is likely that the nature of DLT will have profound structural effects on Islamic finance.

Commercial pressure from a growing Islamic finance sector may well lead to jurisprudential harmonization. Commercial pressure from a growing Islamic finance sector may well lead to jurisprudential harmonization. If FinTech leads to this end result, it will be a unique case of material innovation influencing moral beliefs, underscoring the revolutionary nature of this wave of digital finance.

However, this technical innovation has highlighted the fact that fragmented and poorly organized material jurisprudence is a major obstacle to the growth of the Islamic finance industry. In addition to increasing the size of the Islamic finance market, DLT can generate many secondary benefits, particularly in the context of crypto-currencies: financial inclusion, building trust, and supporting legal recourse in the event of Shariah non-compliance.

JEL Classification: G29

Paper type: Theoretical research