Cooperation with Blocko from Islamic Development Bank

Islamic Development Bank collaborated with Samsung-backed Blocko. Islamic Development Bank plans to develop and implement a Blockchain-based credit management system. The research arm of the Islamic Development Bank Group of Saudi Arabia aims to develop a Blockchain-based smart credit management system. The bank's Islamic Research and Training Institute (IRTI) has collaborated with Samsung-backed Blockchain provider Blocko towards this goal. The partnership was established by Blocko as part of the E24P regional consortium launched in the Middle East, Africa and Southeast Asia in April.

Overcoming Technical and Economic Handicaps

The Islamic finance sector is expected to reach a value of $2 trillion to $3.78 trillion by 2022. IRTI Director General Dr. Sami Al Suwailem said there were some technical and economic difficulties that “prevented the full development of the sector”. Unlike traditional financial institutions, Islamic banks do not charge interest on loans or penalize those who fail to pay their debts. But instead they charge a late fee which is used for donations. Differently, this approach causes some problems because it removes the incentive for those who have debts to pay their debts. In addition, such banks have difficulties in allocating late fees to donations effectively. The smart credit management system, developed by E24P and IRTI and based on Aergo Hybrid Blockchain, is expected to create a mechanism to encourage timely repayment. The mechanism in question will also automatically provide fees to insurance pools that cover loan delays.

The Credit System Will Be More Open, Secure and Transparent

Blockchain credit system will help both Islamic banks and other financial institutions to carry out credit evaluations in a more secure and transparent manner, without violating the privacy of the parties involved. E24P CEO Phil Zamani said the system will offer banks “a truly unique solution that has the potential to make a significant impact on the world of Islamic finance.” The solution can further reduce cost and operational challenges by adding otherwise restricted finance functions such as credit reporting, credit scoring, credit history, and credit insurance.