SmartCredit.io has been at the forefront of DeFi for 5 years. It offers P2P DeFi solutions as opposed to Peer-to-Pool-to-Peer (P2P2P) solutions. The main reason is that P2P is a much less regulated activity than P2P2P.
But there is one more topic—the P2P allows them to enter a market that the other DeFi companies are unable to enter because of their asset pooling: Islamic Banking.
That’s why we created a Joint Venture with Haqq Network and ported the SmartCredit.io solution into the Haqq Network. We also made it Islamic banking compatible.
Our JV will be launched as BarakaFI.com – very soon!
What is Islamic Banking?
Islamic Banking is Sharia-compliant banking; it sets many limitations to the typical “Western” banking. The most known limitations are:
- It is P2P
- The lender has to bear the risk
- Interest is not allowed
While “Westerners” are used to their style of banking, a blossoming parallel ecosystem of Islamic banking serves more than one billion people.
However, until now, there have been no Web3 solutions to this blossoming ecosystem. This is because today’s DeFi cannot be used in Islamic Banking …
This means the Islamic population is not using the usual DeFi borrowing/lending solutions because of non-compliance. On the other hand, the reach and impact of Web3 DeFi could be much higher for Islamic Banking. However, the DeFI today is implemented for the “Western” banking system without considering the requirements of Islamic Banking.
Why DeFi cannot serve Islamic Banking today?
Islamic Banking requires P2P (peer-to-peer) systems. However, today, DeFI lending/borrowing is built on P2P2P (peer-to-pool-to-peer) systems. This P2P2P architecture is not suitable for Islamic Finance.
Islamic Finance requires the source of the funds to be known. However, pooling the assets on the lender’s side means that no single individual can be identified.
There are some additional reasons, too:
- Interest is not allowed in the Islamic Banking
- The lender has to share risk in the Islamic Banking
These criteria imply that none of the DeFI systems can be used for Islamic Banking today.
However, SmartCredit.io is a P2P system—hence, it has an Islamic banking-compliant architecture. That’s why we created the Joint Venture with the Haqq Network, ported the system, modified it to make it Islamic banking-compliant, and will launch it very soon.
BarakaFI.com
BarakaFi.com is a joint venture of Haqq Network and SmartCredit.io for offering Islamic Banking:
- SmartCredit.io brings the technology
- Haqq Network brings marketing
Initial BarakaFi.com features are:
- Purchase a Loan Position
- Crypto Financing
The following features will be added very soon, too:
- Investment Funds
- AI-driven Investment Funds
Microloans
The most crucial feature of BarakaFi.com is the microloans – the transaction costs on the Haqq Network are non-existent.
The current version of SmartCredit.io runs on the Ethereum network and has relatively high transaction costs. Because of this, the minimum loan size is 250 USD for example.
However, as Haqq Network has such low transaction costs, it is feasible to offer tiny microloans.
Banking the Unbanked and Under-banked
The unbanked are people who have no access to a bank account. The underbanked are those who have access to banking accounts but have no access to banking services at fair prices.
The ratio of unbanked and under-banked in the Islamic Countries is much higher than in Western countries.
But Web3 DeFi solutions have focussed on the “Western” countries, without considering the requirements of the Islamic Banking. This means all this big narrative of Web3 DeFi solving the unbanked and under-banked is not able to deliver the promise. However, this promise can be delivered now.
BarakaFi.com offers access to both unbanked and under-banked at very low costs. Plus, it provides microloans, which are especially required for these two segments.
Additional Information
Follow us on Social Media
- Twitter: https://twitter.com/smartcredit_io
- Gitbook: https://learn.smartcredit.io
- Telegram: https://t.me/SmartCredit_Community
- Haqq Network: https://haqq.network/
- Haqq Network announces JV with SmartCredit.io: https://www.haqq.network/blog/barakafi-the-first-halal-defi-lending-platform-powered-by-haqq-and-smartcredit-io
