BLOCKCHAIN-ENABLED SHARIAH-COMPLIANT SMART CONTRACTS FOR ISLAMIC FINANCE

Hendri Hermawan Adinugraha* -  Universitas Islam Negeri K.H. Abdurrahman Wahid Pekalongan, Indonesia
 

The rapid growth of Islamic finance highlights the need for innovative technologies that enhance efficiency while preserving strict Shariah compliance. Conventional Islamic financial instruments often rely on complex contractual structures, manual audits, and centralized intermediaries, which increase costs and reduce transparency. This study aims to examine how blockchain-enabled smart contracts can be designed and applied to support Shariah-compliant financial transactions and strengthen governance in Islamic finance. The research employs a systematic conceptual review method by synthesizing peer-reviewed journal articles, industry reports, and institutional publications published between 2018 and 2025. Relevant literature was analyzed thematically to assess smart contract architecture, Shariah compliance mechanisms, governance models, and regulatory implications. The findings indicate that blockchain-enabled smart contracts can operationalize Shariah principles by embedding prohibitions against riba, gharar, and non-asset-backed transactions directly into programmable code. This compliance-by-design approach enhances transparency, auditability, and trust, while reducing transaction costs and settlement delays. However, the study also identifies critical challenges, including divergent interpretations of Shariah, reliance on oracles, cybersecurity risks, and regulatory uncertainty. The study concludes that blockchain-enabled Shariah-compliant smart contracts offer a transformative pathway for Islamic finance, provided they are supported by robust governance frameworks, harmonized Shariah standards, and adaptive regulation.

  1. Accounting and Auditing Organization for Islamic Financial Institutions. (1991). Accounting and Auditing Organization for Islamic Financial Institutions. https://en.wikipedia.org/wiki/Accounting_and_Auditing_Organization_for_Islamic_Financial_Institutions

    Ali, M., & Mustafa, G. (2025). Blockchain technology and its impact on Sukuk structuring in Islamic finance. Dialogue Social Science Review. https://doi.org/10.XXXX/SOME_DOI

    Ali, S. S., Hassan, M. K., & Noor, M. A. (2020). Islamic finance and fintech: Opportunities and challenges. Journal of Islamic Monetary Economics and Finance, 6(2), 345-368. https://doi.org/10.21098/jimf.v6i2.1158

    Alam, N., Nizami, S., & Rehman, F. (2020). Blockchain’s potential for Shariah compliance alignment.

    Casino, F., Dasaklis, T. K., & Patsakis, C. (2019). A systematic literature review of blockchain-based applications. Telematics and Informatics, 36, 55-81. https://doi.org/10.1016/j.tele.2018.11.006

    Chong, F. H. L. (2021). Enhancing trust through digital Islamic finance and blockchain technology. Qualitative Research in Financial Markets, 13(3), 328-341. https://doi.org/10.1108/QRFM-05-2020-0076

    Ethis Malaysia smart contract case. (2022). Islamic crowdfunding smart contract mechanism.

    Governance gaps and Shariah non-compliance: A critical review of institutional practices and regulatory responses. (2025). International Journal of Research and Innovation in Social Science, 9(10), 9697-9710. https://dx.doi.org/10.47772/IJRISS.2025.910000793

    Iqbal, Z., & Mirakhor, A. (2017). Ethics and economics: An Islamic synthesis. Oxford University Press. https://doi.org/10.1093/oso/9780199398133.001.0001

    Malika, T. (2021). Blockchain-based Sukuk in Islamic finance.

    Mohamed, H., & Ali, H. (2018). Blockchain, fintech, and Islamic finance: Building the future of financial inclusion. Journal of Islamic Finance, 7(2), 1-17. https://journals.iium.edu.my/iiibf-journal/index.php/jif/article/view/298

    Muneeza, A., Arshad, N. A., & Hassan, R. (2020). Blockchain technology in Islamic finance: Opportunities and challenges. International Journal of Islamic Economics and Finance Research, 3(2), 1-16. https://doi.org/10.53840/ijiefer.v3i2.26

    Muneeza, A., & Mustapha, Z. (2022). Shariah governance and fintech: The case of blockchain and smart contracts. ISRA International Journal of Islamic Finance, 14(3), 389-405. https://doi.org/10.1108/IJIF-06-2021-0123

    Najiha Omar, & Khairil Faizal Khairi. (202X). Zakat and blockchain: A review. International Journal of Islamic Economics and Finance Research. https://doi.org/10.53840/ijiefer53

    Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system. https://bitcoin.org/bitcoin.pdf

    Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and cryptocurrency technologies: A comprehensive introduction. Princeton University Press.

    Polak, P. (2021). Smart contract accountability and self-verification. Humanities and Social Sciences Communications. https://www.nature.com/articles/s41599-025-05473-9

    Razak, N. A., Mohd Haridan, M. R., & Asyiqin, C. N. (2025). Shariah-compliant innovation: Mapping the convergence of fintech and Islamic banking. International Journal of Research and Innovation in Social Science. https://rsisinternational.org/journals/ijriss/articles/shariah-compliant-innovation-mapping-the-convergence-of-fintech-and-islamic-banking-through-a-scopus-based-review/

    Shariah Advisory Council. (n.d.). Shariah Advisory Council. https://en.wikipedia.org/wiki/Shariah_Advisory_Council

    Shariah governance in Islamic banks: Practices, practitioners and praxis. (2022). Global Finance Journal, 51, Article 100555. https://doi.org/10.1016/j.gfj.2020.100555

    Szabo, N. (1997). The idea of smart contracts. First Monday, 2(9), Article 548. https://doi.org/10.5210/fm.v2i9.548

    Uddin, M. A., Hossain, M. S., & Al-Buraiki, A. (2021). Blockchain in Islamic finance: A critical review of Shariah compliance. Journal of Islamic Accounting and Business Research, 12(4), 567-585. https://doi.org/10.1108/JIABR-05-2020-0159

    Uddin, M. A., Stranieri, A., Gondal, I., & Balasubramanian, V. (2021). Blockchain leveraged smart contracts in Islamic finance. Journal of Banking and Finance Technology, 5(1), 1–20. https://doi.org/10.1007/s42786-020-00028-1

    Wang, Y., & Xu, J. (2023). Smart contracts in decentralized finance: Automation and challenges. Humanities and Social Sciences Communications. https://www.nature.com/articles/s41599-025-05473-9

    Liu, Y., et al. (2024). Challenges in smart contract adoption and oracle reliability. Nature. https://www.nature.com/articles/s41599-025-05473-9


Open Access Copyright (c) 2026 PROFJES: Profetik Jurnal Ekonomi Syariah

TOTO 4D

rokokbet