Decentralized finance (DeFi) for financial institutions: a sentiment analysis and Islamic perspective

What is it about?

This research explores how decentralized finance (DeFi) can align with Islamic principles and what modern scholars think about its potential impact on financial institutions. DeFi refers to a new financial system built on blockchain technology, which allows for transparent and decentralized transactions without traditional banks or financial intermediaries. The study analyzed 133 academic articles to understand scholars' views on DeFi, using software to categorize their opinions as positive, neutral, or negative. The results show that most scholars are optimistic about DeFi, seeing it as a way to improve financial transparency, reduce costs, and enhance access to financial services. About 25% of the articles discussed both the benefits and challenges, while a smaller portion expressed concerns about the risks and regulatory issues. From an Islamic perspective, the study found that DeFi can be compatible with Sharia law if it follows specific guidelines to ensure fairness and ethical conduct. This makes DeFi a promising tool for promoting financial inclusion and community welfare in Muslim-majority countries. This research finanly provides a new viewpoint on how DeFi could fit into Islamic finance, offering insights for future innovations and the development of regulations that ensure its alignment with Islamic values.

Featured Image

Photo by Austin Distel on Unsplash

Photo by Austin Distel on Unsplash