SHARIAH ANALYSIS OF SMART CONTRACTS: PRINCIPLES, IMPLEMENTATION, AND FUTURE DIRECTIONS
DOI:
https://doi.org/10.33102/7jr22a81Keywords:
Smart contracts, Islamic finance, Blockchain, Shariah ComplianceAbstract
The worldwide Islamic finance industry, which presently oversees assets worth USD 3 trillion, has a revolutionary chance with the incorporation of blockchain-based smart contracts. These digital agreements can greatly improve transparency, save administrative expenses, and lessen conventional aspects of gharar (excessive uncertainty) by automating deterministic "If-Then" protocols without the need for centralized intermediaries. However, there are significant jurisprudential and practical difficulties with converting qualitative, human-centric Shariah principles such as verifiable mutual consent (ijāb and qabul) and contractual flexibility (iqālah) into strict algorithmic code. This work uses a focused literature analysis with Scopus AI to synthesize 22 peer-reviewed texts published between 2018 and 2026 to address these multifaceted concerns. The study investigates the Shariah implications, potential real-world uses, and technological and operational obstacles related to smart contracts. The results show that although smart contracts have great potential to optimize Islamic trade finance, tawarruq financing, sukuk issuance, and social finance vehicles like zakat and waqf, their general adoption is still severely limited. The lack of thorough cross- border regulatory frameworks, vulnerabilities associated with third-party data oracles, and the unresolved legal conundrum of liability (dhamān) for technical failures are the main challenges. The study concludes that in order to fully realize the potential of smart contracts in accordance with maqāsid al-Shariah, regulatory organizations, software developers, and Shariah scholars must work together to create unified international standards and strong digital governance.
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