Exploring the Potential and Suggesting a New Conceptual Framework of Blockchain Technology in Estate Distribution
Syahirah Balqis Anuar1*, Fatin Afiqah Md Azmi1, Syaza Nur Syazwana Sidek2
1 Faculty of Built Environment and Surveying, Universiti Teknologi Malaysia, Johor Bahru, Johor, Malaysia,
2 Centre for Real Estate Studies (CRES), Institute for Smart Infrastructure and Innovative Construction (ISIIC), Universiti Teknologi Malaysia, Johor Bahru, Johor, Malaysia
*Corresponding Author: [email protected] Accepted: 15 February 2022 | Published: 1 March 2022
DOI:https://doi.org/10.55057/ijarti.2022.4.1.5
_________________________________________________________________________________________
Abstract: This paper investigates the potential and advantages of blockchain technology in estate distribution. This is needed for speedy and efficient distribution of estate to the lawful and rightful beneficiaries. Hence, the issues of estate distribution in Malaysia are explored particularly involving documentation management problems whilst application and distribution process. This research provides an extensive review on the issues of estate distribution in Malaysia, the concept and definition of blockchain technology, the potential, the conceptual framework as well as the scenario-based architecture of blockchain technology in estate distribution. The finding reveals that studies on blockchain technology in the distribution of estate have more opportunities and need more studies to be carried out.
Keywords: blockchain technology, estate distribution, framework, unclaimed estate _________________________________________________________________________
1. Introduction
Problems with managing the deceased's estate are becoming more common due to difficulties that arise throughout the estate distribution procedure. Most people do not grasp the Islamic estate distribution system, and they are less concerned with estate management, even though it is highly significant in life. The responsibility of custody of property, repayment of loans, disposal of debts, change of ownership, development of a property, and so on are all essential aspects of estate distribution. Individuals that help with this duty include executors, administrators, and trustees (Md Yusof, 2008).
Generally, estate refers to property left by a deceased person to be inherited by his family members and others. It includes both movable and immovable property, after deducting all debts and obligations required by law to be paid to the entitled parties, but excludes property given to another person during the deceased's lifetime, property sold by the deceased, property endowed by the deceased, property held in trust by the deceased, pensions, gratuities, and gifts from persons visiting the deceased (Muda, 2016). The purpose of this legislation is to ensure the stability of the deceased's family life and beneficiaries following the death of family members who can assist the deceased's family during their lifetime.
According to Kelantan State Syariah Judicial Department, estate management planning in Islam is divided into two, namely estate planning during life, referred to as testate estates, and
estate distribution after the property owner's death, referred to as intestate estates. Among the forms of estate planning during life are hibah, wills, waqf, alms, and vows. Meanwhile, estate management after death is the distribution of inheritance which is subject to faraid law.
Although faraid plays a role in the division of property, if not properly understood, the distribution of property through such means can lead to problems.
With the rapid advancement of digitalization, public organisations and governments must also contend with developing digital technologies that have the potential to disrupt their operations and services. Blockchain technology, which is equipped with Industry 4.0 technologies, appears to be an appropriate solution to integrate in order to solve estate distribution concerns.
Peters and Panayi (2015) stressed that the blockchain operates differently than traditional databases because it encrypts and stores data on every node linked to the network, hence eliminating the potential of a single point of failure, fraud, or corruption.
The concept of a blockchain can be better understood by comparing it to a Google Doc although blockchain is far more complex than a simple Google Doc. A document is distributed rather than copied or transferred when created and shared among a group of people. Alternatively, everyone can access the document at the same time in a decentralized distribution chain as well as all changes to the document are logged in real-time, no one is locked out while waiting for another party to make a change. On this basis, blockchain technology on the estate distribution is the need of the hour whereby estate distribution documentation can be managed more efficiently using blockchain technology, which can reduce distribution concerns. On one hand, the Peer-2-Peer (P2P) overlay network propagates data, while the blockchain storage stores valid data. Miners must solve the proof-of-work (PoW) puzzle before a new block can be added to the main chain. The reason is, each transaction record is maintained in the chaining block, the nature of the blockchain allows the parties to track the history of the estate transaction. It is hoped that the idea of blockchain technology can speed up the process of estate distribution.
2. Issues of Estate Distribution in Malaysia
According to media reports, there are several estate management issues in Malaysia, resulting in more than 1 million inheritance claims worth RM52 billion remaining unsettled in 2014 (Sabirin, 2014). The amount grew to RM60 billion in 2016 (Berita Harian), and there are assets worth more than RM70 billion that have been frozen in 2020 (Sinar Harian, 2020). The accumulation of unclaimed estate in the following years, 2021 is up to RM 90 billion (Utusan Malaysia, 2021).
Amanah Raya Berhad (ARB) has formed a special department, the Deferred Fund Management Department or can be called as Jabatan Pengurusan Dana Tertangguh (JPDT), to handle assets, including movable and immovable property that have not been claimed by beneficiaries in ARB. According to ARB Managing Director Adenan Md Yusof, there is a total of RM315 million in unclaimed property at ARB, the majority of which is immovable property. Several steps have been taken to address this issue, including collaboration with the National Registration Department or known as Jabatan Pendaftaran Negara (JPN) and establishing a toll-free number for reviewing and filing claims (Amanah Raya Berhad, 2020).
The confusion of the heirs is one of the issues with estate distribution because the claim procedure involves multiple jurisdictions with distinct institutions such as the State Islamic Religious Council, Syariah Court, Land Office, Civil High Court, Amanah Raya Berhad, and other private organizations. Because each of these organizations performs a different function,
they encounter difficulties during the claim process. In addition, conflicting information and inconsistencies among estate management departments are caused by inconsistent information management and updating. The information gathered was not properly stored or shared with the rest of the administrative bodies and agencies (Hasbullah, 2021). This factor causes some people to doubt the legitimacy of Malaysia's estate administration system, which is reported to be inefficient, resulting in estate arrears of tens of billions of ringgit. Besides, the estate category is now larger since it includes assets other than land, jewels, and savings such as shares, leading to various issues that must be settled during the distribution process, making settlement procedures difficult and time-consuming (Abdul Rashid & Yaakub, 2010).
The issue of estate distribution also occurs when heirs who wish to claim the estate fail to provide complete documents to manage the partition procedure (Ainan Husnaa, 2020; Md Yusof, 2008; Muhamad 2006). As a result, when submitting a claim at the Land Office, Civil Court, or Amanah Raya Berhad, it may be challenging to recognize and prove the existence of the land (Wan Suraya, 2016). This problem with incomplete documents might also be caused by excessively extended delays in settling the estate distribution (Wan Abdul Halim, 2011). In order to proceed with the estate distribution procedure, the administrator or executor must confirm that the beneficiary of the inheritance is genuinely eligible and recognized as such under Islamic law (Fatin Afiqah & Tahir Sabit, 2015). Loss of documents such as death certificates, or multiple death, which occurs when heirs are slow to initiate a claim for estate distribution. Besides, there are difficulties in determining heirs' status such as the certificate of birth, proof of marriage and divorce, adoption, conversion, and other challenges faced by the heirs to determine their share rates on the deceased estate (Wan Abdul Halim, 2011).
Problems also arise with estate distribution when beneficiaries are missing or cannot be identified. Initially, the heirs must apply, including a list of names and an identity card for the estate's assets and heirs. However, there are rare instances in which misleading testimony results from the applicant's dishonesty and false designation of heirs. The application of faraid certificates has been subject to fraud on several occasions, resulting in duplicating certificates during inheritance distribution (Ainan Husnaa, 2020). Many situations result in postponed funds because the heirs cannot be located, the heirs have moved, or the address provided is incorrect (MyMetro, 2020). As a remedy to these problems, an integrated, up to date and complete record as well as a robust information management system can be a solution.
Besides, Abdul Rashid & Yaakub (2010) mentioned that the estate owners might cause estate distribution issues, making the distribution more complicated. For instance, the property owner does not disclose the heirs about the asset's ownership; thus, the heirs are unaware of the estate's existence. This factor occurs when the property owner is unconcerned with problems regarding the land ownership records, such as when the ownership document is lost, resulting in unclear ownership of the land and the potential of overlapping borders. As a result, the procedure of claiming the estate becomes more difficult. Most Muslims think that the initial planning that is the planning of the distribution of assets during life, is unnecessary due to the implementation of faraid law set in Islam (Buang, 2009). Those perceptions must be changed so that such problems do not reoccur in the future, causing difficulties for the beneficiaries.
The latest information storage technology, which is blockchain, is one of the best sources of solutions in dealing with the issues mentioned earlier. This is due to the fact that blockchain technology enables quicker searching and filtering for specific information, providing ease to its users while minimizing costs and time consumption. It uses decentralization and
cryptographic hashing to make the history of any digital asset or document unalterable and transparent.
3. The Concept and Definition of Blockchain Technology
Blockchain is defined as a chain of information-containing blocks and can be treated as a peer- to-peer protocol that can keep track of Internet transactions (Swan, 2017). In addition, the technology is meant to timestamp digital documents so that, it is impossible to be backdated or tempered. The increased usage of digital texts, audio, and video and the ease with which documents can be amended has created a problem verifying when the document was created or last altered (Haber & Stornetta, 1991). The issues of duplicate records can be controlled with blockchain technology without the need for a central server. All blockchains can be classified as permissionless, permissioned, or both. Permissionless blockchains enable any user to join the blockchain network and become "nodes", with no restrictions on the blockchain network's nodes' rights. Permissioned blockchain, on the other hand, limits access to the network to specific nodes and may also limit the rights of those nodes on that network. The identities of permissioned blockchain users are also known to the other permissioned blockchain users.
Blockchain structures are divided into four types. They are public blockchain, private blockchain, consortium blockchain, and hybrid blockchain (Kathleen et al., 2021). Public blockchains are permissionless, which means that all blockchain nodes can make new blocks of data and verify existing blocks of data, while private blockchains are permissioned blockchains that are controlled by a single organization. Who is eligible to be a node in a private blockchain is determined by the central authority. However, the authority does not necessarily grant each node equal powers to execute functions in the network. Instead of being managed by a single entity, consortium blockchains are permissioned blockchains managed by a group of organizations. As a result, consortium blockchains have a greater extent of decentralisation than private blockchains, which results in enhanced security. Setting up consortiums can be challenging since it demands cooperation between different organizations, which can result in logistical difficulties and possibly antitrust concerns.
The last type of blockchain is hybrid blockchain whereby this paper will highlight a new conceptual framework of blockchain technology in estate distribution. A single entity manages it, but with oversight provided by a public blockchain, required for certain transaction validations. The hybrid blockchain architecture is distinguished because it is not publicly accessible, yet retains the benefits of blockchain technology, such as integrity, transparency, and security. It is entirely customizable in terms of who can join the blockchain network and whose transactions are made public, which is the heirs in the case of estate distribution. Hybrid blockchains can give all the security and decentralization benefits of a public blockchain while also restricting the ability to access transactions in any way. Access to the network is restricted to certain individuals, guaranteeing that no confidential information goes out of the network.
Thus, hybrid blockchains increase security by combining both functionalities.
4. The Potential of Blockchain Technology in Estate Distribution
In Malaysia, the process of distributing an estate is highly time-consuming and paper-intensive.
As a result, it is inefficient and susceptible to disturbance. The appropriate authorities should take action because of the increased total amount of unclaimed inheritance property (Wan Muhamad Fokri et al., 2021). Many practitioners and experts have believed that blockchain technology can revolutionize a wide range of industries since 2008. (Beck et al., 2018).
Blockchain technology is a database technology that can be used to replace the current technique of dealing with inherited property concerns.
A blockchain acts as an open database in which all information is shared and accessible via each chain of participants, referred to as a node. This is referred to as a decentralized system.
There is no central server, there is no system owner, and there is no system controller.
Therefore, everyone in the chain may see and examine all of the information or data. There is no secrecy in the blockchain system's operation. This is referred to as an open ledger system.
Figure 1: Overview of Blockchain
Among the potential and benefits of blockchain technology if being applied to the estate distribution process are: (1) Reduce the duration of the estate distribution process: In order to distribute the estate, several administrative bodies must authenticate and verify the validity of the assets. Depending on the complexity of the administration and inheritance property claim processes, this can take anywhere from four months to one year to complete (Wan Muhamad Fokri et al., 2021). Due to the complicated inheritance property distribution claim process, each beneficiary must complete a number of processes to obtain their share of the deceased's property. Because of its ability to record real estate certificates, any changes, digital maps, spatial data, and settlement records transparently and securely while also preventing evidence from being tampered with or destroyed, the blockchain streamlines the entire process.
(2) Access control and confidentiality: Information privacy is a significant impediment to the sharing of personal information. Information should be exchanged and transferred among organizations only through a reliable network (Razavi and Iverson, 2006). For example, in Bitcoin, Tschorsch and Scheuermann (2016) discovered that high energy proof-of-work techniques guarantee high levels of consistency and protection against forgery by any player in the network competing against less expensive ones.
Using blockchain technology to verify government claims might be an option for some citizen services. Government distrust is lessened when citizens and officials have equal access to information. Cryptography is used to ensure the integrity of the blockchain's records.
Participating parties in the network have their private keys allocated to them, including the administrative bodies and agencies involved. Since multiple organizations keep data on estate distribution property, inter-organizational information sharing is necessary to expedite proceedings. The use of blockchain technology to record property transactions will also aid in more efficient and effective property management, as transactions and associated information will be updated in near real-time.
(3) Transaction and ledger state immutability: Each block contains a unique hash function, a nonce (block-specific number), and a hash function from the previous block. The first block is called genesis block; thus, there must be previous blocks that have been forged before a new block can be forged. (Karamitsos et al., 2018). After the documentation has been updated, it is impossible to make changes to it. It is necessary to upload a new document each time a modification is made. This makes it difficult for the attacker to disrupt the block and avoid detection. The ledger's state can only be modified using the smart contract function, which is recorded as a transaction on the blockchain and cannot be changed otherwise.
Since blockchain technology is now available, there is no risk of fraud in all documents and preventing any problem of fraudulently reducing or adding assets or heirs to the estate. This blockchain-based system will bring in all stakeholders, including the relevant government bodies and the heirs of the estate, on a single platform, and each time the rights transfer process is done will be through the blockchain. All stakeholders can see the estate distribution transaction that takes place. Heirs can trust that their estate distribution transactions are accurate and permanently recorded. Thus, a blockchain-based system with smart contracts provides a transparent and unchanging track of division and ownership.
5. Conceptual Framework of Blockchain Technology in Estate Distribution
Figure 2 and Figure 3 shows the framework and scenarios of using blockchain in the estate distribution process. The Royal Malaysia Police (RMP) must issue a funeral permit to the beneficiaries before they may apply for the distribution of the estate. The RMP will notify nodes participating in the blockchain. The National Registry Department (NRD) will then disclose the death certificate. Jabatan Agama Islam Negeri will release the deceased information and the beneficiaries' information.
Figure 2: Conceptual Framework of Blockchain Technology in Estate Distribution Source: Safina (2021) with modification by the authors
The administrators of estate distribution, property agencies, and other interested parties will also be prompted by this. Among the administrative body such as Amanah Raya Berhad (ARB), Bank Negara Malaysia (BNM), Shariah High Court, Lembaga Tabung Haji, Employee Provident Fund (EPF), Insurance / Takaful companies, estate planning entities, and the Road Transportation Department Malaysia. The other parties and agencies that also may be involved are Perbadanan Wakaf (which holds the waqf land-and-building information), Bankers/creditors, purchasers, and other possible holders, include the Lembaga Hasil Dalam Negeri (Taxation, Water, Electricity, and Sewage), and the Perbadanan Tabung Pendidikan Tinggi Nasional (Education Loan).
A smart contract will then distribute the whole amount of property among the heirs according to Islamic law once all the necessary data and documents have been gathered in one blockchain platform. Money will be deposited straight into the heirs' accounts in proportion to their part of the estate, and other immovable and moveable assets will be transferred to the new owners' names. All of the processes that take place through the platform will be visible to the heirs involved. With this, the entire estate distribution process may be accomplished in a more dependable, faster, and more accessible manner, benefiting both the heirs and the administrators and agencies involved in the process.
Figure 3: Scenarios of a Blockchain-based Architecture
The conceptual framework and scenarios of blockchain technology in the abovementioned is to ease and speed up the process of estate distribution notably involving assets and liabilities of the deceased person, the information of the eligible beneficiaries, and other various data related to them.
6. Discussion and Conclusion
It is preferable for administrators and agencies involved in estate distribution in Malaysia to switch to a more technical approach of document management rather than the more time- consuming and complex existing method. Unclaimed property in Malaysia has increased since the administration of this estate distribution continues to be plagued by the same issues. There are many advantages to using blockchain technology. It cannot be corrupted, is decentralized, has increased security and distribution ledgers, and can expedite the partition of property due to its qualities like consensus and faster settlement. However, implementing this blockchain technology necessitates the collaboration of multiple parties, including the Royal Malaysia Police, National Registry Department, State Islamic Religious Department, Civil High Court, Financial Institution, estate distribution administrators, and other organizations. They must therefore be ready for these new changes in their data management, but eventually, their job will be more efficient and speedy.
Acknowledgement
The authors are highly acknowledged for awarding UTM Encouragement Research Grant (UTM-ER) Vote Q.J130000.2652.18J43 and the Ministry of Higher Education finances the work.
References
Abdul Rashid, R. & Yaakub, N.I. (2010). Masalah Kegagalan dan Kelewatan Pengagihan Harta Pusaka di Malaysia. Fakulti Undang-undang UiTM Arau, Perlis.
Aqilah Mior (2021). RM90B Harta Beku Tidak Dituntut - Utusan Digital
Beck, R., C. Müller-Bloch and J. Leslie King (2018). “Governance in the Blockchain Economy. A Framework and Research Agenda” Journal of the Association for Information Systems (forthcoming).
Buang, A.H. 2009. Pengurusan Harta Keluarga Mengikut Islam dan Realiti Semasa di Malaysia. Jurnal Muamalat Bil. 2.
Fatin Afiqah & Mohammad Tahir Sabit. (2021). A Proposal for A Single Tribunal of Estate Distribution. Jurnal Teknologi (Sciences & Engineering) 75:10 (2015) 1–16
Haber, S. & Stornetta,WS. (1991). How To Time-Stamp a Digital Document. Journal of Cryptology.
Hasbullah, M. (2021). Model Pusat Sehenti Pengurusan Harta Pusaka Islam (Faraid). Fakulti Syariah dan Undang-undang, Universiti Sains Islam Malaysia.
Mahmood, A.M. 2009. Tuntutan Agama dalam Membuat Perancangan Harta.
Mahyuddin Khalid (2011). Konsep Harta Dalam Islam.
Md Yusof, N. (2008). Hukum wisoyah & realiti permasalahannya dalam konteks perancangan pusaka Islam. Jurnal Muamalat 1: 73-102.
Muda, R. (2016). Harta Pusaka Islam di Malaysia: Antara Perundangan dan Pentadbiran.
Fakulti Syariah dan Undang-Undang Universiti Sains Islam Malaysia. Malaysian Journal of Shariah and Law.
Muhamad, A. (2006). Isu-isu dan masalah-masalah dalam pengurusan pembahagian pusaka kecil. Prosiding Seminar Kebangsaan Pengurusan Harta dalam Islam, hlm. 27-40.
Muhammad Saifullah, A. H. 2020. Arising Issues in the Management of Simple Testate and Intestate Estates at Amanah Raya Berhad (ARB). Master Thesis, Department of Shariah and Law Academy of Islamic Studies, University of Malaysia.
Razavi, M. N., and Iverson, L. (2006). A grounded Theory Of Information Sharing Behavior In A Personal Learning Space. Paper Presented at the Computer Supported Cooperative Work, Proceedings of the 2006 20th Anniversary Conference on Computer Supported Cooperative Work.
Sabirin, A. (2014). Umat Islam Rugi Berbilion Ringgit Kerana Harta Pusaka.
Safina binti Mohd Ali. (2021). Information Sharing and Search System to Ease Estate Distribution in Malaysia.
Swan, M. (2017). Anticipating the economic benefits of blockchain. Technology Innovation Management Review.
Wan Suraya Wan Hassin (2016). Faktor-faktor yang Mempengaruhi Harta Pusaka Beku di Malaysia. Fakulti Pengurusan Dan Muamalah, Kolej Universiti Islam Antarabangsa Selangor (KUIS).
Tschorsch, F. and Scheuermann, B. (2016) Bitcoin and Beyond: A Technical Survey on Decentralized Digital Currencies. IEEE Communication Survey Tutorial, 18, 2084-2123.
https://doi.org/10.1109/COMST.2016.2535718
