Islamic Bank Al Hilal Executes Islamic Bond Transaction on Blockchain

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UAE based financial institution Al Hilal Bank has become the first Islamic bank to execute a transaction on the blockchain. As reported by Reuters, the state-owned bank executed an Islamic bond known as Sukuk on the blockchain. The transaction was facilitated on the secondary market, and the distributed ledger technology was used to sell and settle a certain percentage of its $500 million five-year Sukuk. The Sukuk was issued in September 2018, and are scheduled to mature in September 2023.

Al Hilal Blockchain

The bank partnered with Jibrel Network, a UAE-based Fintech who leveraged on the Plug and Play ADGM innovation platform, designed to accelerate the adoption of blockchain for the Islamic Finance Sector.

Co-Founder of Jibrel Talal Tabbaa added:

“We are firm believers that by combining Jibrel’s tried and tested smart contract solutions with the world-class industry expertise held by Al Hilal Bank’s Digital Transformation Team, we will be able to provide Islamic Financiers with the necessary tools to facilitate Islamic agreements with the same speed, volume and efficiency experienced in conventional finance, and potentially develop new digital asset classes that were previously unimaginable.”

According to the report, the new initiative will promote efficiency during bond sales and cut the overhead cost the bank incurs during issuance and settlement of bonds. Speaking on the historical event, CEO of Al Hilal Bank said his bank was proud to be “the first bank to launch a ‘SmartBlockchain Islamic Sukuk,” going further to add:

“Once again the bank has demonstrated that it has the capabilities of leading in the competitive market of Islamic banking. Moreover, the advantages of using smart contracts range from cost efficiency, robust Shariah compliance, to the unlocking of new opportunities. The partnership between Al Hilal and UAE incubated startup, Jibrel, highlights ADGM’s success in attracting, nurturing and fostering innovation.”

Al Hilal’s decision to issue its sharia complaint bond on the blockchain mirrors a similar decision by the World Bank, who settled an AUD$100 million ($73 million) blockchain bond on the Ethereum blockchain in August.

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The two-year bond, which was dubbed the ‘Bondi’ for Blockchain Operated New Debt Instrument, was floated as a means to improve the efficiency at which third world countries automate their financing processes—moving them away from the manual process of effecting bond sales. The sole arranger of the bond at the time was the Commonwealth Bank of Australia (CBA), while the bond’s yield was priced at 2.251% return.

Austrian €1.15 Billion Bond

About the same time, the World Bank floated its bond on Ethereum’s blockchain; the Austrian government also floated a €1.15 Billion Bond on Ethereum’s blockchain. The bonds which were arranged by the Oesterreichische Kontrollbank (OeKB), on behalf of the Austrian Federal Financing Agency (OeBFA).

Finance Minister Hartwig Loger had remarked in a statement, at the time:

“The digitization of the financial sector, also known as fintech, has long arrived in Austria. We need to use the positive effects intelligently for the financial services sector. Blockchain technology is an economic policy focus for us. With the establishment of the FinTech Advisory Council in the Ministry of Finance, we are developing strategies to help Austria make the best possible use of these developments.”

The OeKB auction was a historical moment for Austria, as the country pioneered the deployment of sovereign bond on the blockchain network. The 1.1 billion euros bond were made up of two German government bonds, 0.75% Federal Bond 2018 – 2018 and 0.00% Federal Bond 20166 – 2023. According to Angelika Sommer-Hemetsberger, an OeKB management board member, the distributed ledger technology offers a great opportunity for the government to “increase efficiency” while ensuring the “quality of bank processes.”

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Based in the UK, Jimmy has been following the development of blockchain for several years, and he is optimistic about its potential to democratize the financial system. Follow him on Twitter: @adejimi or Contact

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