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

Wednesday, June 17, 2015

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.