Friday Dec 13, 2024
Friday Dec 13, 2024
Wednesday, 28 February 2018 00:00 - - {{hitsCtrl.values.hits}}
Sydney (Reuters): A new venture aims to use blockchain technology to modernise the management and investments of Islamic charitable endowments, called waqf, which would tap into a vast but underutilised pool of assets across the Muslim world.
Singapore-based financial technology company Finterra has developed a crowd-funding platform that uses digital ledger technology, or blockchain, to create “smart contracts” that would be tied to specific waqf projects, said Finterra founder and Chief Executive Officer Hamid Rashid. The firm hopes this can provide a more efficient way to raise money, manage and transfer ownership of waqf, which receive donations from Muslims to operate social projects, such as mosques, schools and welfare schemes.
“We are trying to change the financial terrain in its approach to crowd-funding and development of waqf,” said Rashid in a telephone interview.
Finterra’s plans reflects the interest that a number of fintech companies have in broadening their footprint to include core Islamic finance markets in the Middle East and Southeast Asia.
The company started developing its blockchain platform in October, with pilot projects currently being studied from endowments in Singapore, Malaysia and Indonesia, said Rashid. “By June we hope to have the product fully up and running and we can then start on-boarding clients. We can then promote to global waqf boards and to regulators.” The firm will host a forum in Kuala Lumpur, the capital of predominately Muslim Malaysia, next month to discuss the applications of blockchain for waqf, having attracted interest from waqf bodies in Brunei and India.
Islamic endowments are believed to hold large portfolios of real estate, commercial businesses and other assets, with an estimate of as much as $ 1 trillion of assets held in waqf globally.
The waqf concept dates back more than a thousand years, reaching its heyday during the Ottoman Empire.
But, the assets in many waqf are underutilised and earn low returns because of ineffective management, with some waqf requiring further donations to keep running.
Donations must be pledged to specific goals making it difficult to repurpose a waqf, limiting fundraising from banks which can find it difficult to liquidate such assets.
The use of blockchain could address this by tracking each contract electronically across the lifespan of the investment, said Rashid.
A potential waqf project being currently studied involves the redevelopment of a school in Jakarta, Indonesia, into a commercially-viable property, he added.
