The concept of microfinance (or microcredit) can essentially be viewed as ‘small-scale banking’. Microfinance traditionally includes loans (with interest), savings accounts, insurance, fund transfers, etc. (services provided by traditional banks). Also, funds from microfinance enterprises can be used however the borrower chooses (starting a new business, paying school fees, funding weddings, paying for medical bills, etc).

However, for our purposes, we are focused on primarily supporting poor families (with or without a primary male wage earner) financially with the ultimate aim of resulting in financial independence. Therefore, the goal here is to use microcredit (loans) for small business ventures (for example one can imagine using some funds to buy a food cart and initial food stock like fruits and vegetables to sell in an open market). The basic concepts of bank loans will be applied:

1. Borrower must state the reason for the loan (i.e., a viable, small business) and amount requested
2. Borrower must pay back the loan over a pre-specified and agreed timeline (however, for Islamic purposes, there will be no interest associated with the loan, but there may be a small fee to fund future loans?)
3. Good records of loans disbursed will be kept, however, because we are solely doing this to encourage financial independence, a formal mechanism to recoup delinquent loans will not be set up initially

It is the hope that through such a scheme, we will encourage the borrowers to find creative opportunities (nothing matches the creative enterprise of the indigent population) to gain financial freedom and reduce reliance on charitable donations which are inconsistent in amount and duration and often result in financial fatigue to donors.