Al Hilal Bank has executed the world’s first sukuk transaction on a blockchain ledger. The state-owned Islamic bank used a DLT ledger for the resale and settlement of an Islamic sukuk—a small portion of a US$500 million five-year sukuk that was issued in September.

The sukuk transaction was worth US$1 million, and sold by Al Hilal to a private investor, according to a statement made to Reuters.

Sukuk are bonds that are compliant with Islamic banks that follow the tenets of Sharia, and adhere to the religious laws set in many Middle Eastern nations. They are comparable to government-issued bonds, but permissible in Islam as these bonds do not yield interest.

The blockchain initiative is the culmination of a collaboration between Al Hilal Bank’s Digital Transformation team with Jibrel Network, a UAE-based Fintech company. Jibrel Network assisted with the necessary blockchain tools and infrastructure.

Together, the pair aim to create what they have dubbed smart sukuks, which Al Hilal bank hopes could transform the sukuk market by embracing blockchain, and integrating into its infrastrcutre—which would pave the way towards digitised Islamik sukuks.

The hope is that smart sukuks will make transactions more efficient, and reduce the costs associated with issuing and settling Islamic sukuks.

Beyond just being the technology backing bitcoin, those in the finance sector have been turning to the ledger for experimentation in hopes of reducing the administrative and overhead costs behind traditional financial functions, while helping them improve record-keeping capabilities and efficiency—particularly when combined with artificial intelligence capabilities.

Featured image via Joseph Group