They Call It Halal Microfinance: Muslims Moving Money With Bitcoins

An Muslim American revert is taking his expertise gained in the financial technology industry and is applying it to offer halal microfinance in Indonesia based on the cryptocurrency bitcoin.

Matthew Joseph Martin, a 30-year-old developer who has previously worked with finance technology start-ups Boku and Xoom, got the idea for his bitcoin-based service when he was looking into loans for his own business following his reversion to Islam in 2010.

“I was running a small business on the side and I had a cash flow issue. Some of my non-Muslim advisors suggested to just get a loan, but I knew interest-based loans are not allowed in Islam. So I started researching Sharia finance. After understanding what Islam advocates as a mode of financing, I started researching what exists in the market today.”


“What I found is a major lack of options and access for modern Muslims to halal sources of financing. In Indonesia, for example, which has at least 220 million Muslims, only 8% of their financial products are Sharia-compliant. I realized this unserved need is a huge problem that needs to be solved. My background is in financial technology doing payments and remittance, so my experience building similar products was really an asset to help solve the problem,” Martin shared.

The solution he proposed was to develop a microlending service based around the profit-sharing model of Sharia, rather than the interest model of conventional finance. He launched his halal microlending company named Blossom in late 2014.

Blossom works by collecting money from several individual investors, which is then invested using a Sharia-compliant version of the microfinance model using profit-sharing (or “mudaraba”). Investors make money by collecting a share of the profit from the businesses that their investment helped to create and grow. The cryptocurrency bitcoin is used by Blossom to move money electronically, allowing for fast, verified, and safe money transfer. When money is invested or cashed out, it is done so in the local currency, which avoids potential issues with bitcoins continuing volatility.

“Bitcoin is a great way to move money. If you’ve ever sent money overseas, you know that it can be expensive due to the fees charged by remittance services. Bitcoin is really two parts: a network for sending value, and a token of value sent on that network. The brilliance of bitcoin is that it’s decentralized, meaning anyone can join the network. You don’t have to be a big bank to join the bitcoin network. All you need is a computer or mobile phone,” the Blossom founder and CEO explained.

Additionally, bitcoin has “proof of ownership”, which provides 100% mathematical certainty that the person trading the assets actually owns the underlying assets. This makes it appealing to Muslim users, as in Sharia a Muslim must own the underlying assets they are trading. This is not always the case in conventional finance, as banking uses a practice known as “fractional reserve,” whereby a bank accepts deposits and holds reserves that are a fraction of the amount of its deposit liabilities, resulting in only a fraction of a bank’s deposits being backed by actual cash-in-hand.

“There is a lot of overlap with the bitcoin community’s goals and what Sharia finance advocates in terms of ownership of underlying assets and reducing uncertainty. Bitcoin as a currency is not in a state where it fulfills the definition of money under Sharia. However, bitcoin or more specifically the blockchain technology behind it, has a lot to offer Sharia financial practice,” Martin added.

Martin has since shifted Blossom to Jakarta, Indonesia, where the market demand and understanding of Sharia-compliant finance was much more mature than that of the US. In Indonesia Blossom is working with microfinance institutions which serve as mini-banks. It invests money through these mini-banks that are distributed around the various cities and villages across Indonesia.

“What the Muslim community needs -and what we’re providing- is a completely halal way to invest and to get investment. Profit sharing investment is not a new model, but we’re making the process much easier using technology and while enabling global participation. You don’t need to be in the same village as the person who’s funding your noodle cart or chicken farm business -that’s really exciting!”

Since Blossom’s launch in late 2014, Martin has been engaged in beta testing the service and has only been accepting accredited investors. The response has been good so far, with Blossom on track to finance more than 200 micro-businesses.

“Our biggest challenge is educational, not operational. Most Muslims know that interest is haram, but when you ask them what type of finance Islam encourages, they aren’t sure. Once I gave a talk at a masjid and had a well-intentioned brother ask: ‘We know finance is haram, so how can you call it halal finance?’ This stems from a lack of knowledge about what finance means -loans are just one type of finance, called “debt finance”. There are many other types of finance, and the majority of other modes of finance are actually halal and approved by scholars,” Martin explained.

As awareness and demand for Islamic finance options grow, Martin hopes to be able to be able to meet the needs of the two billion Muslims estimated to need access to Sharia-compliant or halal financial services. The microfinance sector in Indonesia alone is has already deployed over $12 billion, making it a sizeable and lucrative industry niche to capture.

“My gut feeling is that blockchain-based financial technology will leapfrog conventional banking in Muslim-majority markets with underdeveloped financial sectors in the same way that mobile phones leapfrogged land-lines in Africa or the way microfinance is already leapfrogging conventional banking in Indonesia,” he concluded.

Written by Zarina Khan

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Zarina Khan is an MIT Knight Science Journalism Fellow acting as the head of editorial at a research institute in the UAE. She has a background in print journalism, and has worked as a reporter, editor, stringer and columnist in South Asia and the Middle East.