Founded in 2014, Blossom Finance was initially aimed at Muslim entrepreneurs in the United States. The microfinancing platform connects investors with small businesses using mudarabah, a shariah-compliant profit-sharing agreement. However, founder Matthew Joseph Martin soon realised the startup was serving a relatively niche market in the States. So he began researching markets with large populations of Muslim people and Indonesia emerged as the best choice.
Southeast Asia is already home to a thriving fintech scene, and Indonesia and Malaysia, in the heart of Southeast Asia, are among the countries with the largest Muslim populations in the world. These factors are proving fertile ground for establishing and growing fintechs that focus exclusively on Islamic finance, offering products and services that follow shariah law.
Blossom Finance hosts investors from primarily the United States and Europe, but all of the microbusinesses it serves are in Indonesia because of the financial inclusion challenges facing micro and small businesses. Investors on Blossom Finance’s platform pool their money into funds, or cooperatives, which are then managed by microbanks. The microbanks disburse the financing to microbusinesses to purchase inventory and other things they need. All losses and profits are shared pro rata. What makes Blossom Finance’s microfinance platform shariah-compliant is its use of murabaha contracts instead of traditional interest-charging loans.
A 2022 report found that the market size of Islamic fintech in the Organisation of Islamic Coorporation (OIC) countries was $79 billion in 2021, making up 0.83% of global fintech transaction volume. Whilst Islamic fintech’s market size is still small, it is expected to reach $179 billion at a 17.9% CAGR by 2026, outpacing traditional fintech’s 13.5% CAGR growth over the same period. The World Bank has said that the growth of Islamic fintech can foster financial inclusion by giving unbanked people access to financial services.