NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, April 29, 2015

A startup that recently relocated from San Francisco to Jakarta aims to shake up micro-finance in Indonesia. Blossom‘s concept can be said to be breaking ground: it operates on Bitcoin and targets the global Muslim community.

Here is how Blossom works, in a nutshell: it collects money from investors around the globe, keen on lending money to entrepreneurs who are ready to start a small business, say a food stall or tailor. Blossom does not hand down the funds to business owners directly, but via an experienced microfinance institution on the ground. After a 12-month investment cycle, Blossom collects profits from the microfinance institutions and distributes them back to the investors. Blossom expects returns in the range of 7.5 to 12.5 percent, and itself takes a 20 percent cut on the returns.

No margin trading, no alcohol, no interest

Blossom has two key features that set it apart from other micro-financing schemes. First, all of its money transfers are based on Bitcoin. Using Bitcoin, says founder Matthew Joseph Martin, has obvious advantages. Fees for international transfers are lower, and all Bitcoin transfers can be monitored in real-time via the Bitcoin Blockchain. This creates transparency and trust between investors and the fund recipients. “In conventional investment, I have to rely on the statements and numbers publicised by my partners. With Bitcoin, it’s clear to everyone what’s going on,” explains Martin.

However, that Blossom runs on Bitcoin is not necessarily visible to investors, since Martin chooses not to mention Bitcoin in the company’s communication. Martin prefers to not make Bitcoin itself the topic of conversation, but the benefits it brings to investments, namely transparency and low cost. Investors and recipients do not have to handle Bitcoin themselves, as the Bitcoin-based funds are converted to local currency at the time of pay outs.