Blossom To Bring Bitcoin-Powered Islamic Loans to Indonesia

Jakarta-based bitcoin startup, Blossom, plans to bring loans compliant with Shariah Law to the country with the largest population of muslims in the world, Indonesia. But what sets this startup apart is that the loans will be powered with “Bitcoin in the background.” This will enable investors from all over the world to fund small micro-loans in Indonesia.

Originally founded in San Francisco by Matthew Joseph Martin, who previously worked as a developer for fintech startups Xoom and Buku, the startup recently moved to Jakarta. After converting to Islam in 2010, and discovering bitcoin shortly after, Martin developed a deep interest in how to bring the benefits of bitcoin to Islamic finance.

He came up with Blossom, which in his opinion, brings the best attributes of Bitcoin – transparency, efficiency and global reach – to microloans in Indonesia, a country with a population of 240 million people, 90 percent of which are muslim.

No internet or bitcoin required

Unlike the leading bitcoin lending company BTCJam, Blossom participants do not touch the crypto-currency and the lending service is not peer-to-peer. Blossom instead connects global investors with established micro-lending institutions in Indonesia, who according to Martin, can reach the people who need the money the most. Bitcoin is simply what Blossom uses to send money from global investors to Indonesia, taking advantage of its speed and low fees.

“BTCJam manages the relationship directly with the borrower which requires Internet access. Blossom works with established microfinance villages that reach all the way to remote villages where investments can have the biggest impact. Traditional lenders typically work with ‘banked’ or ‘bankable’ individuals. Microfinance provides financial access to those that fall below bank requirements. 80% of Indonesians over age 15 are unbanked,”
— – Martin

Blossom’s business model also works very differently from BTCJam. Instead of lenders being paid after a loan is repaid, Blossom collects the money from the micro-institutions on a yearly basis. “BTCJam is P2P, so if a borrower defaults the investor is out all their money,” Martin added.

“Blossom uses a ‘basket’ model so investors are protected from individualized risks. Each investment is disbursed as a part of a portfolio that includes several individual businesses as recipients.”
— – Martin

Shariah Compliant Loans

According to Martin, the biggest difference between Blossom and its competition is its compliance with the principles of Islamic finance. Islamic finance is a special set of rules that dictate proper behavior for muslims in the world of finance and business. For example, involvement with businesses or money derived from alcohol or gambling is strictly forbidden. Muslims also can’t receive interest on loans or participate in margin trading.

Blossom only works with institutions complaint with a profit-and-loss sharing principle called Musharakah, a replacement for interest on loans. Instead of creditors receiving interest on the capital lent, Musharakah tells muslim lenders to share the profit and losses of the loan with the borrower.

Being compliant with Shariah finance is a must for entering the large Indonesian market, according to Martin. “BTCjam gives loans with interest and Muslims aren’t allowed to deal with interest; Blossom is fully shariah compliant end-to-end allowing investors access to Indonesia.”