Thursday, May 23, 2024
ReportIslamic microfinance cooperative issues micro smart Sukuk in world’s first primary Sukuk...

Islamic microfinance cooperative issues micro smart Sukuk in world’s first primary Sukuk offering on public blockchain

Breaking new ground and highlighting the trend of digital innovation and social impact finance within Islamic capital markets, BMT Bina Ummah, a Yogyakarta-based Islamic microfinance cooperative, has raised IDR710 million (US$50,034.1) through a primary Sukuk issuance on blockchain using Blossom Finance’s SmartSukuk platform. The issuance is the world’s first primary Sukuk issuance on public blockchain, as well as the first micro Sukuk.

Funds raised from the issuance, which is structured under Mudarabah, will be used by BMT Bina Ummah to expand financing for local entrepreneurs. “The additional funds provided by this Sukuk issuance offer long-term stable funding and increase the overall amount of financing we can offer our members,” said Arif Yuliyanto, the general manager of BMT Bina Ummah, adding that they anticipate this issuance to be the first of many more.

“Unlike the majority of issuances, this pioneering Sukuk offers a genuine profit share for investors — not fixed income — and is closer to the Islamic investment principles that discourage excessive debt and leverage,” said Khalid Howladar, the chief strategy and risk officer of Blossom.

Blossom’s SmartSukuk uses ethereum smart contracts, in which all records, assignments, calculations and payments related to the Sukuk are managed, leaving an indelible audit trail at every stage of the issuance.

The Sukuk Mudarabah issuance, although utilizing a public blockchain, incorporated several layers of permission and identity verification; the smart contract only accepted inbound transfers from pre-approved ethereum wallet addresses. The entire subscription and investment process for the Sukuk issuance was completed digitally, and includes an e-KYC (know-your-customer) process.

Platforms like Blossom’s SmartSukuk remove the conventional barriers to social impact investing, making micro investments feasible and transparent. Blossom’s CEO, Matthew J Martin, said: “Tokenized assets reduce intermediary costs, which makes global finance more accessible regardless of size or borders.”

The platform supports both subscription and periodic payments made via any crypto, tokenized asset or bank-held fiat money. SmartSukuk complies with the ERC20 standards, which enable digital exchange via peer-to-peer or secondary markets, and is therefore compatible with all custodial and exchange solutions.

“Through fintech innovation, the Islamic finance industry finally has the means to fulfill the ethical, social and environmental promise of the sector,” Khalid noted.

Other fintech companies are working on building a digitized Islamic financial infrastructure that serves the Sukuk market; IFN previously reported on an enterprise blockchain software firm’s partnership with a fintech start-up to build a platform that simplifies the Sukuk life cycle, while the UAE’s Al Hilal Bank last November executed a secondary market deal in its US$500 million Sukuk on the blockchain.


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