Samsung backed startup to build an Islamic blockchain-based credit system

Blocko is an enterprise blockchain platform provider founded by Won-Beom Kim in 2014. The startup offers multinational organizations the ability to design, deploy, and manage digital services on a secure distributed network. It provides a blockchain operating system and a development platform with APIs.

The company has raised over US$22.4M in its lifetime, from investors including Samsung Ventures, Daesung Private Equity, SparkLabs Ventures, KEB Hana Bank, and Shinhan Bank. The company is based in South Korea but has a presence in the Middle East and Europe.

Kim previously co-founded the AERGO Blockchain Platform with Phil Zamani in 2018. AERGO is designed to allow enterprises to transfer data without having to trust an intermediary, while also being integrated into existing systems and governed flexibly.

AERGO is a Blocko strategic technology partner, and has itself secured US$30M in venture funding from a slew of investors including Sequoia Capital China, GBIC, Neo Global Capital, Dekrypt Capital, FBG Capital, Arrington XRP Capital, JRR Crypto, Rockaway Capital, and Block Crafters Capital.

In late 2019 Blocko launched in the United Arab Emirates (UAE) in partnership with the SEED Group, a member of the Private Office of Sheikh Saeed bin Ahmed Al Maktoum. According to a blog post, Blocko previously completed 38 full-scale enterprise blockchain solutions in South Korea for companies like Samsung, Hyundai Motors, and Cisco and hopes to continue building through the SEED partnership.

In late April of 2020, Blocko launched a DLT consortium for the Middle East, African, and South-East Asian regions to be based out of Abu Dhabi in the UAE. The consortium is called Execution Intelligence Group (E24P) and aims to boost innovation and accelerate growth in high-growth economies by leveraging promising innovations in a wide range of emerging technologies.

Early members of E24P include Blocko, Abu Dhabi’s Al Nahyan family, Topos, a team of fintech experts that built a mobile remittances platform for the migrant world that was acquired by Western Union in 2011, and a leading UK and China-based research institute. Co-founder of AERGO Phil Zamani is serving as the CEO.

The Islamic Research and Training Institute (IRTI) of the Islamic Development Bank (IsDB) Group has partnered with Blocko, via E24P, and aims to build an Islamic blockchain-based credit enhancement system.

IRTI is a member of the IsDB Group and is dedicated to knowledge creation and dissemination in Islamic Economics and Finance. The institute has been around for nearly four decades and is known to deliver cutting-edge research.

IRTI also works to develop innovative knowledge-based solutions and enhance human capacity in Islamic Economics and Finance for the sustainable development of IsDB member countries and Muslim communities in non-member countries worldwide.

"The Islamic finance market is growing rapidly, with projections of a rise from around $2 trillion to an impressive $3.78 trillion by 2022. Yet certain technical and economic challenges have prevented the industry from truly flourishing," said Dr. Sami Al-Suwailem, Acting Director General of IRTI, on the new partnership. "Our new partnership with E24P aims to address this need by providing the infrastructure needed for the Islamic financial industry to deliver critical services to both the developed and developing world."

The reason innovative credit solutions are needed for Islamic Finance is that Shari’ah law prohibits banks from charging interest on loans to their borrowers. Islamic banks typically offer financing to individuals and businesses is through real economic transactions such as joint ventures, leasing agreements, and other similar models.

Since the Islamic financial institutions can’t collect interest when offering credit financing, they need a mechanism to encourage debtors to pay on time. Commonly these institutions charge debtors with late fees which are then donated to charity.

However, Islamic banks are not allowed to incur any profit from these late-payment charges, they are not incentivized to collect these late fees and distribute them to charities in a timely manner.

The new system being developed by IRTI in partnership with E24P and Blocko aims to solve these problems via a novel incentive mechanism. This new patented system encourages early repayment and contributes fees to an insurance pool that covers involuntary credit defaults.

This type of system is not feasible through conventional arrangements but can be facilitated through the use of high-performance blockchain technology, which is why IRTI is working with E2P4 to develop this innovative platform.