The Islamic Research and Training Institute, the research arm of the Islamic Development Bank Group (IsDB) and SettleMint have agreed to build a blockchain-based financial product that can potentially be used to support development and inclusion in the 57 IsDB member countries. SettleMint, together with their local partner Ateon, based in Saudi Arabia, will be working on using blockchain’s smart contracts to create Sharia-compliant financial products to support development in IsDB member countries.

The use of smart contracts enables the automation of the entire contractual process for Islamic institutions, alleviating the additional administrative and legal complexities and redundancies associated with Sharia-compliant financial products. The International Fiqh Academy has approved contracting through electronic means since 1990.

The agreement is designed to combine blockchain technology to meet demand from Muslim investors, with firms from Indonesia to Canada having already received sharia-compliant certification for their products. Involvement of the IsDB, a multilateral development institution, could also encourage other FinTech firms to incorporate Islamic finance to reach markets across the Middle East, Asia and Africa. The IsDB said such features would allow for instantaneous clearing and settlement of transactions and asset exchanges, while helping eliminate counterparty risk.