What Is A Mudarabah Smart Contract? Firoza Finance Launches $2M Pilot Program, Opens Waitlist

On-chain microfinancing platform Firoza Finance, a joint venture between pioneering financial services and technology company Liberty Finance and EVM-equivalent ethical blockchain HAQQ Network, on Wednesday announced the launch of its pilot program that introduces "the world's first real-world Mudarabah smart contract."

What is a Mudarabah Smart Contract?

In Islamic traditional finance, a Mudarabah is a profit-sharing agreement between a business manager and a capital provider. With Dubai-based Firoza Finance, the decentralized finance (DeFi) world now has its first-ever Mudarabah smart contract that will allow consumers to invest with confidence across diverse risk profiles.

Aside from delivering the world's first-ever Mudarabah smart contract, the platform empowers the global Muslim community by providing ethical, Shariah-compliant investment opportunities through its DeFi solutions, including private credit funds and customizable investments.

Pilot Program for First Movers

Firoza Finance has opened a join waitlist for investors who want to pool their crypto assets and generate a diverse range of returns with varying risk levels.

The pilot program will feature three distinct investment pools, collectively holding a Total Value Locked (TVL) of over $2 million. The pools are expected to deliver a significant Annual Percentage Yield (APY) while contributing revenue to Liberty Finance's Amana Vaults, which facilitate the delivery of Islamic lending services to traditional financiers, Islamic banks, and peer-to-peer lenders.

A New Era of Shariah-Compliant Crypto Investments

The collaboration between Liberty Finance and HAQQ Network marks a significant milestone in the Islamic Finance and DeFi spaces, as Firoza Finance addresses the inherent limitations within existing DeFi platforms.

The Mudarabah smart contract offers a Shariah-compliant microfinancing solution that merges ethical finance principles with the many advanced benefits of blockchain technology.

Aside from helping resolve the ethical dilemmas of DeFi offerings that often do not align with some consumers' religious and ethical beliefs, Firoza Finance also tackles some key issues within conventional financing, including high borrowing costs due to intermediaries and administrative overheads.

"We are excited to offer this unique investment opportunity through our collaboration with HAQQ Network and their esteemed Shariah scholars. The development and deployment of the Mudarabah smart contract represent a significant advancement in combining traditional Islamic financial principles with modern blockchain technology," Patric Devereaux, CFO at Liberty Finance, said in a press release shared with International Business Times.

Capital Accessibility for Smaller Businesses

Small business owners have had struggles with capital due to the various limitations in traditional finance. By eliminating the unnecessary intermediaries and automating processes through smart contracts, Firoza Finance significantly reduces borrowing costs, allowing smaller players and entrepreneurs around the world to have access to capital.

Furthermore, by utilizing Liberty Finance's innovative technology engine and capitalizing on HAQQ Network's robust blockchain infrastructure, Firoza Finance has opened a door for transparent, secure transactions with reduced overhead costs.