Title: The impact of blockchain on risk mitigation in Islamic finance: a new mechanism to mitigate Gharar risks

Authors: Omer Awad Hag Hamid

Addresses: AMA International University, Salmabad, Manama, Kingdom of Bahrain

Abstract: The purpose of this paper is twofold: to explain the Islamic modes of finance nature-related features of risk, and investigate the use of blockchain technology in managing risk in Islamic finance. The major result is that the nature of manageable risks in Islamic and traditional finance exhibits similarities in many aspects. Nevertheless, the Islamic joint ventures and sales-based modes of finance are facing special type of risks. The most outstanding and unmanageable risk is related to Gharar. The paper emphasised that the traditional risk mitigation tools are unable to manage the special risk in the form of Gharar. Finally, the paper summarises the potential contribution of blockchain technology in mitigating risks in the Islamic mode of finance (especially Gharar risk) and highlights its efficiency. The content of this paper is my own work. This paper has not been submitted for any degree or other purposes, it is valuable in currently strong tension to Islamic fin-tech, and how current modern technology can utilise to Islamic banking and finance industry.

Keywords: blockchain; risk management; Gharar; sharia rule.

DOI: 10.1504/IJEBANK.2019.10022916

International Journal of Electronic Banking, 2019 Vol.1 No.4, pp.329 - 340

Received: 12 Mar 2019
Accepted: 27 Mar 2019

Published online: 30 Jul 2019 *

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