World first digital sukuk targets Bitcoin generation

Funds from the sukuk will be passed to an Indonesian microfinance institution, which will then use it to finance budding micro-entrepreneurs. (Supplied)
Updated 09 October 2018
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World first digital sukuk targets Bitcoin generation

  • Blossom Finance hopes its pioneering products can enable retail investors to benefit from the kinds of gains usually only enjoyed by institutions and the ultra-wealthy
  • After creating their user account, members will be able to view various projects (new and old) on the Blossom portal that are funded by digital sukuks

BARCELONA: Later this year, what purports to the world’s first digital sukuk will launch, bringing Sharia-compliant social impact investing to the masses.
Blossom Finance — an Indonesia-based, US-owned and regulated company that’s guided by one of the Gulf’s most renowned experts in Islamic finance — hopes its pioneering products can enable retail investors to benefit from the kinds of gains usually only enjoyed by institutions and the ultra-wealthy.
Digital sukuk can also help steer Islamic finance back toward a higher purpose of supporting the communities in which it operates.
“Islamic finance has yet to realize its true value proposition. Most of it is built on replicating conventional finance, which may be a necessary step but isn’t particularly benefitting society,” said Khalid Howladar, chief strategy and risk officer at Blossom Finance.
“Maybe one person can’t change the world, but I saw within Blossom the scope to help take Islamic Finance to the next level and to support a more investment-based — versus debt-based — economy.
“The core premise of Blossom is to be an active social impact investing platform that will use digital sukuk to raise funds from platform members worldwide.”
 So, how will the company’s digital sukuk work?
There is no paper. Everything is online and digital at blossomfinance.com. After creating their user account, members will be able to view various projects (new and old) on the Blossom portal that are funded by digital sukuks. They can invest in any of these sukuk and trade them online.
Blossom’s debut digital sukuk will launch before year-end and aims to return around 8-10 percent over its one-year duration. However, unlike the bulk of the global sukuk market, this will be a genuine profit-sharing instrument with variable — not fixed — returns.
With potential investors from Chile to New Zealand registering their interest in the sukuk, Blossom hopes to raise around $500,000 to $1 million. The proceeds will be passed to an Indonesian microfinance institution, which will then use it to finance budding micro-entrepreneurs.
“We would rather the sukuk be relatively short in order to reduce the risk, at least at the outset,” said Howladar, who is also managing director and founder of Dubai’s Acreditus, a boutique risk, ratings, regulatory and Islamic finance advisory practice.
“It will also help instil good practices in the microfinance institution as — for the first sukuk — they need the money back after the year. The microfinance institution can then finance the entrepreneurs again providing all requirements are met.”
A second sukuk, which will be written on an Ethereum blockchain and is slated to launch in the first half of 2019, will also be focused on Indonesia’s microfinance industry. Blossom may then issue a digital sukuk to fund a recycling firm that’s found an innovative way to safely dispose of plastic and medical waste, with plastic residue used to lay roads. A fourth potential project is for an asset-backed sukuk that would fund a hospital expansion.
Previously, the administrative requirements — such as taking customer details, allocating unique and unforgeable reference numbers and distributing profits – would have required an expensive corporate and technology infrastructure to support the sukuk.
“As a result, your investment sizes would have to be tens if not hundreds of thousands of dollars per person, because you needed scale to make it work,” said Howladar, who was formerly Moody’s Global Head of Islamic Finance and GCC Banks.
As profit-sharing instruments, the sukuk do not provide guaranteed returns of profit or capital, but that added risk is reflected in the higher potential profits to be made from investing. The minimum investment size will vary according to the sukuk and will start from around $100 for blockchain-based sukuk, while for the first digital sukuk it will likely be about $5,000 reflecting the current real-world onboarding costs.
“Only when we are fully operational can we use tech to bring the subscription threshold down,” said Howladar.
“Hopefully Blossom’s platform can help democratize the investment process so that you don’t need to have a brokerage account or access to a ‘Swiss’ private bank to invest your money in markets that over the long term generate returns that are typically more than bank deposits.”
The sukuk will have an Indonesian counterparty bank that can receive investors’ funds.


Iran falls to sixth biggest oil supplier to India as sanctions bite

Updated 14 December 2018
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Iran falls to sixth biggest oil supplier to India as sanctions bite

  • Tehran dropped two places to become only the sixth biggest supplier after New Delhi cut purchases due to the impact of US sanctions
  • The UAE, which was the sixth biggest oil seller to India in October, became the third-top seller to India in November

NEW DELHI: India’s monthly oil imports from Iran plunged to their lowest in a year in November with Tehran dropping two places to become only the sixth biggest supplier after New Delhi cut purchases due to the impact of US sanctions, according to ship tracking data and industry sources.
Last month, the US introduced tough sanctions aimed at crippling Iran’s oil revenue-dependent economy. Washington did, though, give a six-month waiver from sanctions to eight nations, including India, and allowed them to import some Iranian oil.
India is restricted to buying 1.25 million tons per month, or about 300,000 barrels per day (bpd).
In November, India imported about 276,000 bpd of Iranian oil, a decline of about 41 percent from October and about 4 percent more than the year-ago month, ship tracking data obtained from shipping and trade sources showed.
After abandoning the 2015 Iran nuclear deal, US President Donald Trump is trying to force Tehran to quash not only its nuclear ambitions and its ballistic missile program but its support for militant proxies in Syria, Yemen, Lebanon and other parts of the Middle East.
India’s imports from Iran in November, included some parcels that were loaded in October. In November, Iraq and Saudi Arabia continued to be the top-two oil sellers to India.
The UAE, which was the sixth biggest oil seller to India in October, became the third-top seller to India in November, knocking down Venezuela to fourth position.