The Islamic Development Bank Group’s research department in the Kingdom of Saudi Arabia is seeking to develop a blockchain-based intelligent credit management system.
To achieve this, the Islamic Institute of Research and Education (IRTI) at the bank is working with a Blockchain provider supported by Samsung Blocko. The partnership is part of the regional group E24P, which Blocko launched in the Middle East, Africa and Southeast Asia in April.
In the face of technical and financial problems
By 2022, the Islamic finance industry is expected to grow from $ 2 trillion to $ 3.78 trillion, said Dr. Sami Al-Suwalem, IRTI’s CEO, and there are still many technical and financial problems that “hinder the industry from developing.” for real”.
Unlike traditional financial institutions, Islamic banks do not charge interest on loans and do not penalize non-performing loans. Instead, they charge late fees to charities.
However, this approach is not without problems as it eliminates the need for borrowers to repay their loans. In addition, these banks also have difficulty distributing overdue commissions to charities.
It is expected that the intelligent credit management system developed by E24P and IRTI, which will rely on the hybrid chain of Aergo blocks, will create an incentive mechanism that will stimulate timely payment. It will also automatically pay for insurance pools that cover credit defaults.
A more open, secure and transparent credit system
It is said that the blockchain credit system helps both Islamic banks and other financial institutions make credit assessments in a more secure and transparent manner, without violating the privacy of the parties involved. E24P CEO Phil Zamani said the system will help banks “offer a truly unique solution that can have a huge impact on the Islamic financial world.”
It can also reduce costs and operational difficulties by including otherwise limited financing functions such as credit reports, credit assessment, credit history and credit insurance.