Wethaq Completes Pilot of First Fintech Sukuk, Uses R3 Corda

Wethaq Capital has announced that it has issued the first pilot Sukuk on its securities market platform for the Islamic capital markets under the supervision of the Dubai Financial Services Authority (DFSA). Wethaq is operating under an innovation testing license issued by the DFSA.

Mohammed Alsehli, CEO of Wethaq, commented on the successful pilot:

“We are pleased to have achieved this milestone under our Innovation Testing Licence from DFSA with the generous support of the DIFC ecosystem. We are one step closer to releasing our infrastructure to the market and facilitating the Islamic capital market to reach its 4x growth potential.”

A Sukuk is a financial instrument similar to a bond that is shariah compliant. The Sukuk market is currently worth several trillion dollars.

According to Wethaq, Al Ghurair Investments LLC (AGI) acted as the issuer, advised by Mashreqbank PSC acting as
lead arranger, R3 as the protocol provider with Corda.  Additionally, Clifford Chance acted as legal counsel and the Dubai Islamic Economy Development Centre as mentor.

Nabeel Waheed, AGI Group CFO, said that following the pilot AGI is delighted to be the issuer of the very first Fintech Sukuk – a first of its kind globally.

The Dubai International Financial Centre (DIFC) is a significant location for the issuance of Sukuks thus this pilot seeks to demonstrate how issuance can become more streamlined using Fintech technology.

Wethaq states that it consolidates and automates the agency and infrastructure services required in the entire lifecycle of Sukuk product while enabling transaction participants and their service providers to interact more efficiently through digitized workflows.

Wethaq’s infrastructure has been developed on R3’s Corda Protocol integrating Swift payment and settlement functionality through Swift gpi Link and, importantly, integrates with incumbent market infrastructures and “avoids digital currencies and ‘tokenisation’ of securities.”

By using Swift gpi Link, Wethaq will be able to integrate Swift’s global payments innovation (or gpi) service into its platforms, connecting with more than 3,500 banks around the world using the service.

Bryan Stirewalt, Chief Executive of the DFSA, commented that DFSA’s Innovation Testing Licence (ITL) program is “successfully encouraging and enabling innovation in the DIFC.”

“Wethaq’s pilot issuance is a great example of this effort and a great example for the future of Islamic finance. Innovation is pushing the boundaries of financial services through these new technologies as we witness their integration into existing and evolving business models.”

Ahmed Abdelaal, CEO of Mashreq Bank, said they continue to be at the forefront of digital transformation and our collaboration with a leading Fintech company to positively disrupt market convention is an important milestone in that journey.

“We are proud to be associated with the Wethaq – a platform that shall enable issuers, new and old, to raise Islamic capital via Sukuk.”

Cathy Minter, Chief Revenue Officer at R3, added:

“Wethaq’s contribution to the Sukuk market represents an important step in bringing the benefits of automation in Islamic capital markets. Its collaboration with the DFSA reflects R3’s own ethos of working closely with regulators to achieve sustainable results for the industries we are looking to transform. As such, we are proud that our Corda platform can enable Wethaq to deliver the promise of distributed ledger technology to Islamic capital markets. We look forward to seeing Wethaq achieve continued success.”

The case study regarding the Wethaq Sukuk project is available here.

According to the document:

“Wethaq’s objective to improve transparency in the Sukuk markets is aligned with Shariah principles. The distributed ledger facilitates cashflow record-keeping in a transparent and easily reconcilable way that demonstrates the source and timing of payments. In the Sukuk context, this can support transparency in the issuance and payment process and in tracking the underlying assets or cash flows generated.”

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