The world’s first primary sukuk issuance on blockchain was closed last week, highlighting two growing trends within Islamic capital markets: digital innovation and an increasing focus on social impact finance.
The issuer is a community-based microfinance institution in Indonesia known as Baitul Maal wat Tamweel (BMT) that combines commercial Islamic microfinance with social impact projects. BMT raised 702 million Indonesian Rupiah ($50,000) through a primary sukuk issuance on the blockchain via Blossom Finance’s SmartSukuk platform. Blossom’s platform allows both retail and institutional impact investing via a browser-based investor dashboard, although more tech-forward investors may also elect to interact directly with their investments via the Ethereum blockchain Funds raised in the offering, which uses a mudarabah (profit sharing) structure denominated in IDR and carries a maturity of one year, will be used by the Yogyakarta-based Islamic microfinance cooperative to expand financing for local entrepreneurs. Blossom Finance in Indonesia, which developed the platform that enabled the sukuk was founded in 2014 aims to increase the availability of Islamic financial services using technology.
The sukuk has also been credited in Islamic capital market as the first “micro sukuk”. Blossom’s impact investing platform is the first to fund social impact projects through a blockchain-based sukuk. SmartSukuk utilises Ethereum “smart contracts” which is essentially a computer program that runs in the blockchain. All records, assignments, calculations, and payments pertaining to the sukuk are managed via the smart contract, which leaves behind an indelible audit-trail at every step of the way.
According to Blossom CEO Matthew J Martin, “SmartSukuk removes the conventional barriers to social impact investing by making micro investments feasible, transparent, and ultimately tradeable.” “Containerised freight reduced logistics costs which, in turn, brought global commerce within reach of virtually anyone across the globe. In much the same way, tokenised assets reduce intermediary costs, which makes global finance more accessible regardless of size or borders,” he said.—Zawya/Reuters