Al Hilal Islamic Bank Completes Sukuk Transaction with Blockchain Technology

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Al Hilal Bank,  a progressive Islamic Bank headquartered in Abu Dhabi has announced the successful completion of an Islamic Sukuk transaction via distributed ledger technology, making it the first Islamic bank to achieve such a feat, according to a local news source, Abu Dhabi City Guide on November 26, 2018.

Sukuk on the Blockchain

Per sources close to the development, Al Hilal bank of the United Arab Emirates has entered into the history books as the first Islamic financial institution in the world to use distributed ledger technology (DLT) for the resale and settlement of an Islamic Sukuk.

For the uninitiated, an Islamic Sukuk is simply an Islamic financial certificate also known as “sharia-compliant” bond whereby the issuer is also required to sign a contractual agreement that they must buy back the bond in future, at par value.

Al Hilal Bank reportedly settled its $500 million Senior Sukuk maturing in September 2023, over the blockchain, making it the first Islamic bank in the world to execute a Sukuk transaction via the blockchain.

According to the Abu Dhabi City Guide, Islamic Sukuk has experienced steady growth in recent times, with $97.9 million worth of Sukuks issued in 2017 alone, which is a 50 percent increase from last year’s performance.

Al Hilal Bank Looking to Transform Sukuk

Founded in June 2008 by the Abu Dhabi Investment Council, an investment arm of the Abu Dhabi government, Al Hilal says it’s aiming to transform the Sukuk industry via distributed ledger technology and establish a whole new world of innovative digitised “Smart Sukuks.”

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The CEO of Al Hilal Bank, Alex Coelho expressed excitement over the new development, stating categorically that being the first bank to launch a “Smart Blockchain Islamic Sukuk” shows Al Hilal has the capabilities of being a great leader in the Islamic banking ecosystem.

“The advantages of using smart contracts range from safer transactions with robust shariah compliance, to the unlocking of new opportunities,” said Coelho.

According to the Al Hilal team, the DLT-powered Islamic Sukuk transaction was made possible by the excellent work of the bank’s Digital Transformation team alongside Jibrel Network, a UAE-based fintech firm and the Abu Dhabi Global Markets (ADGM).

The UAE region has been warming up to digital assets and blockchain technology for quite some time now. Earlier in June 2018, BTCManager informed that the Abu Dhabi International Center’s Financial Services Regulatory Authority (FSRA) had implemented guidelines for the region’s cryptocurrency space.

In September 2018, BTCManager reported that the Dubai Financial Services Authority (DFSA) had inked a strategic deal with the Monetary Authority of Singapore (MAS) to increase blockchain and fintech cooperation between the two regions.