Smart contract-based Islamic Fintech model for Mudaraba financing

Abstract

The purpose of this study is to explore the possibility of applying smart contracts in Islamic finance transactions and to explore the application of smart contracts in Mudaraba contract. Mudaraba financing is an ancient Islamic contract where one party known as Rabb-Ul-Maal provides the fund to the other party known as Mudarib to do the business on his behalf and share the profit on agreed terms and conditions. The study is an exploratory in nature as it explores the possibility of Islamic finance tool 'Mudaraba' to fight the adversities of COVID-19. Based on the extensive review of literature, the study proposes a Fintech model based on smart contract for Mudaraba transactions. The study will help in better understanding and application of smart contract in Islamic finance. It will also help the users of Islamic finance services to grab the opportunity and adopt the smart contract technology in their business practices. The proposed model can be a useful tool in fighting the adverse effects of disasters like COVID-19, war and earthquake, etc., and it will help in uplifting the standard of living of the poor by creating employment opportunities and contributing to the GDP.