On December 19 2021, Islamicly organized an webinar to explain how investors can earn halal profit sharing from micro-businesses in Indonesia. Blossom Finance is a digital platform that allows individuals to invest in a halal portfolio involving real-economy sector businesses to earn profit sharing based on Islamic principles.
The following is a summary of the topics covered by Blossom Finance founder & CEO Matthew J Martin. You can also watch the webinar on YouTube.
Background
Blossom Finance was founded in 2014 and recently opened to the public in January 2021. Blossom’s focus is investment in shariah compliant microfinance of real-sector economy small businesses in Indonesia. Real-sector economy businesees are those providing tangible goods and services within their community, such as farms, grocery stores, mechanics, and micro-industry.
Important Notice: all investments carry a certain degree of risk. Prior to making an investment decision, you should carefully consider all terms and risk factors stated in the offering documents and information on Blossom’s website and apps.
In our endeavor of bringing more financial products for the Shariah sensitive investors, Islamicly organized an webinar to explain how investors can participate and earn halal profit sharing from micro-businesses in Indonesia. This is part of Islamicly outreach to bring credible Shariah compliant investment products to its users.
Disclaimer: Islamicly does not expressly recommend such third party products nor has the Islamicly Shariah board conducted a detailed review of the product. We have relied on the representations of the product management as to its Shariah compliance by reviewing evidence of their Shariah certification. Please read the risks disclaimer given below carefully.
Microfinance
Microfinance is NOT about financing small amounts of money. Rather, microfinance aims to reduce poverty through access to savings & productive financing products. This means providing working capital for small business owners without them needing to take on heavy debt or engage in usurious or riba based financing. Riba (otherwise known as usury or compounding interest) is forbidden in Islam because it pulls people down into poverty by burying them under debt.
True microfinance works to help people save money & get financing to be productive so they can improve their financial situation.
Our Service Partners
Blossom partners with unique shariah compliant microfinance institutions in Indonesia called BMTs. BMT stands for Baitul mal wa Tamwil which can be loosely translated as “House of charity & finance”. These BMTs combine islamic social funds (zakat, sadaqah, infaq, waqf) with commercial funds to lift people out of poverty & onward towards success.
In order for people to go from poverty to success, our service partners provide a ramp of success that is broken up into two distinct segments. The 1st is funding which they provide from the aforementioned charitable funds to the poor “Baitul Mal”, and the 2nd is funding which they provide from commercial funds “Baitul Tamwil”.
Charitable financing
It is a well known saying that “if you give a man a fish he will eat for a day, but if you teach a man to fish he will eat for the rest of his life.” What our service partner BMTs do is really a step beyond that. To continue the metaphor, they essentially give a man a fishing pole, teach him to fish; then teach him how to sell what he catches.
Drawing from the charitable funds under their management, our service partners issue grants to the poorest of the poor which they can use to buy goods to start a small business. They also provide training and education on how to start a small business. Once the recipient of the grant has started to make a small profit from the initial grant & manage to maintain regular business hours, they become eligible for the next step.
The next step is to receive an interest free loan, also provided from the charitable funds under the BMT’s management, to grow their business to the next level. Then, when this is successful and the entrepreneur has become productive & moved out of poverty. They become eligible for commercial financing, and this is where Blossom comes in.
Commercial financing
Our service partners draw their commercial financing funds from the saving of their members and from investors like those investing with Blossom Finance.
Blossom provides funds for financing real sector small businesses in Indonesia. These businesses range from automotive repair, to farming, to woodworking across over 30 industry sectors. But what they all have in common is that they are essential businesses that are needed on a day to day basis.
Our service partners provide access to financing for entrepreneurs by sending their agents to the shops, stalls, market places of their customers while they are still open and conducting business. This means that instead of taking valuable time away from running their businesses, these customers can easily attend to their financing needs before quickly getting back to being productive and making money.
Blossom Finance Structure & Performance
Blossom Finance, as a US Delaware company is subject to US federal law & Delaware corporate law. We are a fully licensed & regulated microfinance institution in Indonesia under the Ministry of Cooperatives through our KSPPS Gerbang Digital Nasional (Indonesian for National Digital Gateway); holding licenses as both a digital service provider & as a shariah compliant savings & loan cooperative.
As mentioned above, Blossom manages a portfolio of investments across multiple service partners, locations, and individual small businesses that span over 30 real economy sectors. This is deliberate & used as a way to mitigate risk to our investors. This built in diversification, combined with Blossom’s active management of the portfolio, limits risk of losses because even if multiple individual businesses fail, the over-all portfolio will not be seriously impacted. For example our most recent instrument ran through the height of the Covid-19 pandemic, and although many businesses did take a financial hit, the over-all portfolio was able to recover and still managed to return 14.5% to investors on an annualized basis.
How Investments With Blossom Work
Blossom Finance offers investment opportunities for individual investors starting at about $150 USD. When you invest, you select 3, 6, 9, or 12 month durations (called “tenure” in finance).
After funding your investment, your original investment is “locked up” for that duration.
You will receive monthly profit sharing payments. Your balance of profit sharing can be withdrawn at any time. Note that you as the investor will pay the bank transfer fee (charged by 3rd parties, not by Blossom). We recommend against withdrawing small amounts frequently as the bank transfer fees will negatively affect your profit.
You will receive monthly profit sharing payments. Your balance of profit sharing can be withdrawn at any time. Note that you as the investor will pay the bank transfer fee (charged by 3rd parties, not by Blossom). We recommend against withdrawing small amounts frequently as the bank transfer fees will negatively affect your profit.
Shariah Compliance
Your investment with Blossom is based on a profit sharing contract (called mudarabah). In this agreement, you provide funds to Blossom and we invest those funds on your behalf (as the mudarib). Your role in this agreement is capital provide or investor (called rab al-mal).
We work with a network of service providers. The profit sharing you receive is net of fees and costs incurred by our service providers to manage your portfolio.
We work with a network of service providers. The profit sharing you receive is net of fees and costs incurred by our service providers to manage your portfolio.
We actively balance the portfolio of small businesses managed by our service providers to minimize risks where possible.
For example, we avoid too much concentration within any single region or within any single industry segment. We never allow more than a tiny percentage of the portfolio to be invested in any single businesses. This process of diversification is a key way we help reduce your overall risk to maximize a predictable and positive outcome.
With our service partners, we finance individual businesses to purchase equipment, supplies, and other tangible items needed for their business using a cost-plus model called murabaha. In murabaha financing, the service parter purchases the physical items needed for the business with a pre-agreed markup, and then the business pays that toal amount over a period of time. This type of murabaha financing is approved by shariah scholars and standard issuing bodies, including Majlis Ulema Indonesia (MUI) which is Indonesia’s highest shariah authority.
For example, we avoid too much concentration within any single region or within any single industry segment. We never allow more than a tiny percentage of the portfolio to be invested in any single businesses. This process of *diversification* is a key way we help reduce your overall risk to maximize a predictable and positive outcome.
We make money only when you make money!
To align our incentives with yours, we do not charge any management or administration fees. We only take a share of profits. We take 20% of profits for investments of 12 months, and a higher percentage for investments of shorter durations.
How to Invest with Blossom
You can invest from virtually anywhere in the world. We’re not able to accept investors from any country that is not currently under US sanctions )such as Iran, Sudan South Sudan, Somalia, etc.)
What about India?
Investing from India has previously been difficult for Indian investors! But through our cooperation with flyremit.com, this process has been made much more accessible.
We recommend any investors from India to invest via Flyremit to facilitate a more smooth investment process.
To get started, visit https://get.blossomfinance.com/islamicly/
Once you’ve created your account, you can see a sample calculation of how much profit you could earn each month, depending on the amount you invest and the duration.
Before you invest, we need you to verify your identity including a government issued photo ID. Verifying your account typically takes just 5 minutes.
To fund your investment, we recommend using Wise or sending a conventional bank transfer. Traditional bank tranfers typically makes it to us within 3-5 business days.
Once we receive your funds, you’ll automatically receive a notification to your email and your account will be credited. You can see your balance on the web app.
Each month you’ll receive an email notifying you when you receive a new profit sharing payment. Just log in to your account to see how your investment is doing, your projected returns, and your actual gross profit in your own home currency based on the live exchange rate.
Disclaimer: This product is not, and nothing in it should be construed as, an offer, invitation or recommendation in respect of the Company’s product or its Shariah compliance by Islamilcy. Neither this article nor anything in it shall form the basis of any contract or commitment. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. No recourse or liability is to be construed to Islamicly.
This product is not, and nothing in it should be construed as, an offer, invitation or recommendation in respect of the Company’s product or its Shariah compliance by Islamilcy. Neither this article nor anything in it shall form the basis of any contract or commitment. This article is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. No recourse or liability is to be construed to Islamicly.
