Bilal Kchouri, doctoral researcher in the Department of Finance, has recently published an article entitled “Tokenization of Sukuk: Ethereum Case Study” in the Global Finance Journal. The article was cowritten with researchers from the SnT research group SEDAN (Services and Data Management).
Seeing an opportunity in the lack of quantitative literature on sukuk research, Kchouri and coauthors introduce a novel, exploratory analysis of sukuk tokenization based on a case study.
Sukuk is a financial instrument that provides returns similar to conventional bonds. It has served to cater to the capital requirements of big corporations and governments, while circumventing interest in order to adhere to Shariah law.
Despite a broad use by large companies and states, the funding needs of small and medium enterprises remain largely unmet through sukuk on account of the high costs involved, among other reasons. The researchers demonstrate that blockchains can aid to lower the cost incurred through the tokenization of sukuk, highlighting some of the key challenges involved in the issuance of sukuk and discussing their resolution using blockchain.
Researchers conduct a novel case study on sukuk tokenization by implementing a basic smart contract for Sukuk al-Murabaha on Ethereum, a decentralized open source blockchain. The paper concludes by a conceptual analysis of feasibility concerns, based on a comparison of the conducted cost-benefit analysis of conventional sukuk issuance with tokenization.
The paper can be downloaded here.