Digital Sukuk Issuance For Business Financing

Research consistently show that small- and medium-sized enterprises (SMEs) face greater constraints on access to finance than large firms, due to issues of information asymmetry, lack of collateral, and higher cost of servicing loans. In view of the large contribution of SMEs to output and employment in emerging Asian economies, it is critical to enhance the access of SMEs to finance in a way that is consistent with sustainable growth and financial stability. In this chapter, the author recommends putting asset-backed bonds on the blockchain to enable transparency and put forth steps to automate cumbersome processes in asset-backed bond issuances, in order to reduce costs and improve efficiency. Significant advantages of using technology to operationalize trust and instil confidence in properly structured and executed financial instruments will also be discussed. The author will also make these recommendations on the basis of fulfilling a gap in traditional bond issuances, which is currently occupied by the loan markets.