KUALA LUMPUR, Malaysia - The 15th Annual Kuala Lumpur Islamic Finance Forum (KLIFF) Awards Ceremony convened Tuesday, April 9, 2019 to recognize outstanding individuals, institutions, and corporations in the field of Islamic finance. Blossom was awarded "The Most Outstanding Islamic Micro Credit Company" for its SmartSukuk™ technology. Blossom's SmartSukuk™ utilizes blockchain 'smart contract' technology to reduce traditional barriers faced when issuing and investing in sukuk.
Sukuk is a mode of financing used by Islamic finance capital markets. Unlike conventional bonds, sukuk operates according to specific rules that govern Islamic finance practice, including prohibitions on interest and gambling. Sukuk typically uses an 'asset-backed' structure where investors purchase an asset, and commercial returns are generated based on the profits generated from that asset, such as ownership of a business or real estate. Like bonds, sukuk are generally tradable in secondary markets like stocks, but represent ownership of a financing arrangement rather than equity ownership in a company.
"We're honored by this award and thrilled that the industry recognizes the importance of our technology - SmartSukuk™ - in terms of unlocking financing for sustainable development initiatives. We're working hard to make sukuk viable for issuers and investors at any size amount, from anywhere in the world, and we appreciate the acknowledgement."
Most sukuk issuances are of sizes in hundreds of millions or billions USD, and typical servicing costs can exceed $1M USD per year. Blossom claims its technology eliminates many of these costly intermediaries and simplifies the sukuk issuing and investing process, which will help enable smaller institutions to raise sukuk. According to the IIFM Sukuk Database, as of 2018 the global public sukuk market has approximately $500 Billion USD worth of outsanding sukuk: 60% from governments (sovereign and quasi-sovereign), 32% from corporates, and 38% from financial institutions.
Blossom's SmartSukuk™ runs on the Ethereum blockchain, but is denominated in local currency, such as Indonesian Rupiah. The Ethereum blockchain supports 'smart contracts' which are computer programs that run in the blockchain. Using smart contract technology, calculations related to the sukuk - such as management of the ownership ledger, distribution of profit payments, and return of the principal capital upon maturity are all digitally automated and tracable. Blockchain smart contracts support a high-level of auditability, and are therefore well suited to various types of digitally-managed securities such as sukuk.
Since its public announcement of the platform in May 2018, Blossom has focused its SmartSukuk™ on financing cooperative Islamic microfinance insitutions in Indonesia - known as BMTs - using a profit sharing structure where investors earn profit sharing payments generated by a portfolio of microfinance investments managed by the BMT.
BMT stands for Baitul Maal wa Tamwil which represents the institutions' dual mission of sustainability through commercial finance that supports a social mission through non-profit programs. BMTs aim to eliminate poverty by providing free savings products to the working poor and financing to micro-businesses in order to help entrepreneurs start or grow their business. In addition to bank-like products, BMTs operate various social impact programs in their local communities. The BMT model in Indonesia is widely considered the world's most successful Islamic microfinance. The BMT model was first established in the late 1990s in response to the Asian financial crisis as a tool for economic development in rural areas.
Mr. Martin added: "The real heroes are the BMTs. They're incredibly effective at reducing poverty. We want to help them expand to continue doing even more of the fantastic work they're already doing, and hope our SmartSukuk™ will be an effective tool to help them. I'm personally very humbled each and every time I visit a BMT―they're quite an inspiration for me and our team to work even harder."
As for why Blossom's SmartSukuk™ is an attractive source of funding for microfinance in Indonesia, Arif Yuliyanto, General Manager of Yogyakarta based BMT Bina Umma explained: “Raising funds with Blossom guarantees we can put the funds to work for at least one year, and those investors have an appetite for true profit sharing. These two features together help improve our cashflow and liquidity, unlike our normal depositors that typically take funds on short notice and expect profit sharing to always hit the equivalent rate.”
Blossom is currently subscribing funds for its SmartSukuk™ with Yogyakarta, Indonesia based BMT Bina Ummah. Details about investing are available at https://blossomfinance.com/investments
Blossom Labs, Inc. is a US Delaware corporation founded in 2014 in Silicon Valley.