Tuesday, May 28, 2024

    Islamic Endowments to be Modernized by Blockchain

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    The potential applications for blockchain technology are seemingly endless. Every day a new startup applies distributed ledger technology and smart contracts that underlie cryptocurrencies to a different world scenario offering new and innovative ways to streamline existing systems. Islamic charitable endowments, called waqf, are the latest to get the blockchain treatment.

    According to reports Singapore based fintech firm Finterra has developed a crowdfunding platform that uses blockchain to create smart contracts that would be linked to specific waqf projects. A waqf typically involves donating a building, plot of land, or other assets for Muslim religious or charitable purposes with no intention of reclaiming the assets. The concept dates back over a thousand years peaking during the Ottoman Empire.

    Islamic financial markets

    The company hopes to provide a more efficient way of raising funds and managing the transfer of waqf which receive donations from Muslims for social projects such as schools, mosques, and charitable organizations. CEO Hamid Rashid told media;

    “We are trying to change the financial terrain in its approach to crowdfunding and development of waqf,”

    The company is hoping to target core Islamic financial markets in the Middle East and Southeast Asia where pilot projects are already being studied in Singapore, Malaysia and Indonesia. They hope to be up and running by June and will host a forum in Malaysia’s capital Kuala Lumpur in March. Waqf bodies in Brunei and India have already shown interest in the project.

    Underused assets

    Large portfolios of real estate, commercial businesses and other assets can be held in Islamic endowments. It has been estimated that as much as $1 trillion of assets is held in waqf globally.

    Due to ineffective management, with some waqf requiring further donations to keep running, many assets are underutilized for the purpose for which they were donated. Blockchain could address this by tracking each contract electronically across the lifespan of the investment, increasing the efficiency of the potential of the asset.

    The redevelopment of a school in Jakarta into a commercially viable property is one waqf project currently being studied according to Rashid. He hopes this will be the first of many to benefit from the blockchain revolution.

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