Microfinance

The microfinance program is currently under development with the Institute of Halal Investing, a non-profit think tank. The microfinance model we will use is influenced by, but distinct from the Grameen Bank model. Like the Grameen model, we rely on self-selected groups of borrowers to monitor each other. However, in contrast to the Grameen model, ours will not rely upon debt- and interest-based products. Instead, we will use an equity-based, profit-and-loss sharing model influenced by the products used in Islamic banking, but conducted in a nondenominational manner.

The potential benefit from this model is that it provides protection for the microentrepreneur in the early stages of business development when the microfinance institution owns almost the entire business. As the business matures, the client purchases shares of the business from the microfinance institution. Initially, the microfinance institution receives its portion of the profits (say, 50%) and a share of the initial investment. Each week, the client purchases a share of the business (and therefore a share of responsibility for any losses) and by the end of the investment agreement, the client owns 100% of the microbusiness and can either receive an additional investment, receive other outside financing (e.g. from a bank), or continue operating without any outside financing.