US startup brings innovative Islamic microfinance to Indonesia
June 16 2015 09:38 PM
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Matthew Joseph Martin, founder of Blossom, the first ever Shariah-compliant microfinance
platform that combines Islamic finance with Bitcoin transfers.


By Arno Maierbrugger/Gulf Times Correspondent /Bangkok



Founded in San Francisco and recently moved to Jakarta, a financial startup called Blossom aims at nothing less than shaking up the microfinance sector in Indonesia. The company, launched in October 2014 by US entrepreneur and practicing Muslim Matthew Joseph Martin, plans to bring Shariah-compliant microfinance to the country of 240mn people of which 90% are Muslim.
What sets Blossom apart from other financing schemes are two special features. First of all, its entire platform is Shariah-compliant, which means that it is not getting involved in businesses that deal with alcohol, gambling or other areas deemed haram by Shariah law. There is also no interest on Blossom’s microfinance, as the company only cooperates with institutions using the Islamic profit-and-loss scheme called Musharakah. In this scheme, instead of charging interest as a creditor, a financier achieves a return in the form of a portion of actual profits earned and according to a predetermined ratio. But, unlike a traditional creditor, the financier will also share losses, if any, which is in accordance with the risk-sharing scheme in Islamic finance.
The second feature, which is the entrepreneurial element in Blossom, is the fact that its platform uses the cryptocurrency Bitcoin for global money transfers, at least in the background, to keep transfer costs low and money flows transparent.
That way, Blossom collects money from investors around the globe, converts it to Bitcoins in order to send it quickly and cheaply to its destination where the Bitcoins are converted back into local currency. Blossom does not hand down the funds to business owners directly, but via an established microfinance institution on the ground, which lends money to local people who want to start a small business such as a food stall, a tailor shop or a watch repair stand.
The fact that the platform runs on Bitcoin in the background is not a unique sales proposition in any way for Blossom and is not necessarily visible to investors and recipients who do not have to handle Bitcoins themselves, Martin emphasises. It is just making transactions cheaper and more transparent for investors who normally have to rely on publicised statements of conventional lenders.
“I founded Blossom to help people achieve financial prosperity through ethically sound principles, Martin says. “To me, that means financing that is compatible with Islamic principles. The Islamic finance industry isn’t altogether new, but it’s arguably still less developed when compared to non-Islamic financial markets. Based on my research with Muslim small business owners in California, there certainly weren’t any existing solutions meeting their needs.”
However, legal fees and business costs to launch Blossom in California turned out to be quite high for the comparably small US market, and regulatory aspects were quite complex.
“I thought: The biggest market opportunity for Islamic Finance is in Southeast Asia, so why would we launch in the US?” says Martin.
Eventually he bought a ticket to Jakarta and set up the company in a co-working office for startups in South Jakarta called Conclave. Last month, Blossom announced that it will make a “pilot investment of up to $100,000” in Bitcoins into BMT Nusantara Condet, a branch of BMT Nusantara, a cooperative for Islamic finance services, to fund small to medium businesses in Jakarta, a deal seen as “extremely rare in the Islamic finance space” by observers.
“Indonesia’s population is 80% unbanked in a country with 90% Muslims but only 8% Shariah-compliant financial products,” Martin says, adding that Blossom’s platform “enables access to huge emerging markets and helps provide greater financial inclusion with returns averaging between 5% and 10% on principle capital invested.”
The investment cycle is 12 months, after which Blossom starts collecting profits from the microfinance institutions and distributing them back to investors, while taking a 20% cut. Blossom’s Internet portal can be reached under https://blossomfinance.com



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