Blockchain and smart contracts are forming new systems to record and manage businesses with less need for intermediaries. The new systems are expected to offer high level of governance with lower cost as compared to the traditional technologies. While there is a continuous effort to apply this innovative technology in several businesses, Islamic finance in general—and Islamic social finance in particular—are facing few challenges that could be solved by such innovations. Islamic social finance institutions such as waqf are facing some challenges in enhancing its governance structure to ensure Shariah compliance as well as economic efficiency. This chapter explains how blockchain and smart contract technologies can help these institutions for better governance, lower transaction cost, more transparency, and higher trust, hence enhancing the business flexibility and market accessibility. It also presents some related cases that are currently under development as an evidence for the practicality of these technologies in the Islamic social finance arena.

Purpose -The purpose of this paper is to explain and critically analyse the Sharīʿah screening criteria and cleansing process for income generated from stocks with a special focus on a newly developed ISRA-Bloomberg methodology.Design/methodology/approach -The paper focuses on the methodology of ISRA-Bloomberg in terms of Sharīʿah screening of stocks and the income cleansing process. To achieve this objective, this paper adopts a descriptive approach.Findings -The methodology of ISRA-Bloomberg is unique in terms of its criterion for screening stocks, the cleansing process and coverage of the universe of stocks. It facilitates the investors by offering a novel colourcoding scheme to indicate the Sharīʿah compliance of a stock. It also provides the exact ratios of the Sharīʿahcompliance criteria to the investors so they can closely observe changes in the trend of ratios and decide beforehand whether or not a company is likely to remain within the Sharīʿah-compliant list. The paper further discusses the issues in the screening and cleansing practices faced by the industry.Research limitations/implications -This research is limited to the criteria of screening and income purification of stocks which have been used by ISRA-Bloomberg from a Sharīʿah perspective.Practical/implications -The robust screening criteria and comprehensive analysis of the stocks will enhance the confidence of Islamic capital market participants. The investors, regulators and index providers will be equally able to benefit from this initiative.Originality/value -The paper focuses on the recently established methodology of ISRA-Bloomberg, which has not been discussed in the literature until now. The methodology, because of its exceptionality, may add a new dimension to Sharīʿah screening and cleansing of stocks.

The current practices in Money, Capital, Foreign Exchange and Securities markets, based on interest and short selling, stress upon using hedging instruments for risk management. Nevertheless, there is disagreement among scholars and researchers regarding permissibility status of these instruments. Although majority of Islamic economists and scholars have expressed serious concern on the use of financial engineering products, a number of scholars insist on their use by the Islamic financial institutions. The present study aims to evaluate the permissibility status of derivatives in the light of the main features of Islamic law of contract. It is found that, while the hedging instruments may carry various advantages for individual institutions, their usage leads to fragility in the global financial system and markets owing to involvement of gharar, short selling and interest. In order to circumvent the Sharī'ah prohibitions their structures are extremely complicated that lead to deviance from real economic activity. Although some Muslim jurisdictions have allowed derivatives, their usage is not appropriate in the light of set principles for a valid contract, as envisaged by Sharī'ah. Muslim countries and scholars need to develop distinguished instruments for hedging risk in a Sharī'ah compliant manner. This study thus provides with an extensive overview of scholarly views and contemporary practices and offers objective evaluation of derivative contracts.

Blockchain and smart contracts are forming new systems to record and manage businesses with less need for intermediaries. The new systems are expected to offer high level of governance with lower cost as compared to the traditional technologies. While there is a continuous effort to apply this innovative technology in several businesses, Islamic finance in general—and Islamic social finance in particular—are facing few challenges that could be solved by such innovations. Islamic social finance institutions such as waqf are facing some challenges in enhancing its governance structure to ensure Shariah compliance as well as economic efficiency. This chapter explains how blockchain and smart contract technologies can help these institutions for better governance, lower transaction cost, more transparency, and higher trust, hence enhancing the business flexibility and market accessibility. It also presents some related cases that are currently under development as an evidence for the practicality of these technologies in the Islamic social finance arena.

The institution of Waqf always played a pivotal role of sustainable economic development in a Muslim society throughout the history of Islam. However, recently, even with the introduction of the modern Islamic finance a few decades ago, the institution has been struggling to rejuvenate its past glory. The key issues are lack of availability of data and historical records, weak transparency and public disclosure, improper audit and compliance practices. The advent of the blockchain has offered a ray of hope for the revival of the Waqf institution. The blockchain has already proved itself as a game changing breakthrough. Similarly, the Waqf institution could be invigorated with the innovative and efficient use of the blockchain. Moreover, the use of smart contracts on blockchain could further enhance the performance and efficacy of the Waqf institution. It is strongly believed that with the firm Islamic jurisprudential foundations of the Waqf, blockchain, and smart contracts will ensure that the Waqf institution could partake in the economic development of the whole Muslim world.