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Islamic Finance

Indonesian Islamic microfinance lender planning second blockchain sukuk this week after first successful issue

JAKARTA – Indonesian Shariah-compliant microfinance lender BMT Bina Ummah plans to issue another blockchain-based sukuk this week after its first successful fundraising last year, Ely Heni, its General Manager told Salaam Gateway.

The Jogjakarta-based cooperative in August issued 715 million rupiah ($50,476) in sukuk on a public Ethereum blockchain developed by Blossom Finance. Proceeds from the sukuk, which was based on a mudarabah profit-sharing structure and carried a tenure of one year, went to providing financing for entrepreneurs.

Bina Ummah’s planned second sukuk will help it continue to provide financing for its 2,000 active members as well as serve as a bridging fund for the cooperative’s operational liquidity, said Ely.

“We plan to issue 3.5 billion rupiah ($255,419) in sukuk but with a slightly different profit-sharing portion,” she said.

The sukuk will probably carry a maturity of 3-5 months and Ely expects its AROI to be lower than 10%.

Bina Ummah’s sukuk in August offered an AROI of 13.15% (as US$) and was based on a 60-40% profit sharing proportion.

“Alhamdulillah we received the funds late August and we started to use the funds as lending to our members from September,” said Ely.

At the end of January, the proceeds from the sukuk funded 144 individual entrepreneurs, according to a statement from the arranger Blossom Finance.

Bina Ummah supports micro-SMEs and entrepreneurs who are typically excluded from conventional financing support. 

Ely said Bina Ummah’s members who have received financing as a result of the first blockchain sukuk have become more productive as they can access more affordable working capital.

“They apply loans from one million rupiah to 100 million rupiah. Last year, one of our members borrowed 100 million rupiah for a 3-month period,” she added.

Ely said Bina Ummah is looking forward to a continued collaboration with Blossom Finance following the success of the first sukuk.

“I have been making regular monthly reports about our progress to Blossom, to ensure that we are really operating in a Shariah-compliant way. Maybe in the future we will make it a quarterly report,” she said.

Blossom Finance is registered in the United States but works primarily out of Indonesia.

($1 = 13,702.9 Indonesian rupiah)

(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim

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Yosi Winosa