Microfinance Company, Blossom Finance Issues Shariah Compliant Bonds via Blockchain
With the blockchain use case being adopted for a variety of purpose, an Indonesian financial firm, Blossom Finance is eagerly exploring to issue Sharia-compliant bonds namely sukuks across the blockchain platform to fund social projects.
Blossom Finance, a micro-financing platform, especially for social causes through the use of Sharia models, is issuing a blockchain-based sukuk in the days to come as reported by Reuters on Wednesday.
Initially, the company may issue the bond in the smaller size, as the idea behind to use of the new age tech – Blockchain is to lower the issuance cost by attracting more retail investors as said by Khalid Howladar, Chief Strategy Officer at a recent Islamic Accounting Event held recently. He further said in his statement “Technology allows you to onboard customers in a far cheaper way than you could ever do before. The sukuk would use a profit-sharing structure and carry a profit rate of around 10 percent.”
With the innovative features adds value to Sukuks which is trad-able instruments based on a profit-sharing model likewise stocks, which differentiate than others conventional bonds that are more of like debt instruments with an interest component.
Amid this, Blossom Finance actively focuses to introduce other blockchain led bonds to finance a “green waste disposal project” and a “hospital expansion” as stated by the company report.
The company initially introduced its “Smart Sukuk” platform in May 2018 to streamline certain aspects of the bonds by standardizing and automating the entire payment system of the bonds. The entire platform uses ethereum smart contracts so that Sukuk can be issued globally in an efficient manner.
Needless to say that the Blockchain and smart contracts are being attracted in the bonds markets due to the variety of benefits in place. Amid this, a World Bank tested the perspective in August 2018 by raising funds in the range of $81 million via its first blockchain powered bond thereby creating a paradigm for others to follow the same route.
The story is not confined up to here. The city council of Berkeley, California has supposedly approved the issuance of a blockchain led micro bond in May 2018 in order to fund the local projects. Besides this, the global financial conglomerate – JPMorgan Chase created a strategic partnership in May 2018 with National Bank of Canada and other major firms to test a blockchain platform with the aim of streamlining the debt issuance process.
Further speaking to the subject matter, National Bank of Canada on the blockchain perspective said in its statement that “blockchain technology has the potential to bring about a major change in the financial services industry.”