Microfinance Rail

Islamic microfinance for financial inclusion, covering Qard Hasan (benevolent loans), group lending, and social impact measurement.

Overview

The Microfinance rail enables institutions to offer Shariah-compliant microfinance products that serve underbanked and financially excluded communities. The primary instrument is Qard Hasan — a benevolent, interest-free loan where the borrower repays only the principal. The lender may charge a small service fee to cover administrative costs, but no profit is derived from the loan itself.

Beyond Qard Hasan, the rail supports group lending models (inspired by village banking and solidarity group methodologies) adapted for Islamic finance principles. Groups of borrowers collectively guarantee each other’s repayment, reducing default risk without requiring conventional collateral. The platform tracks group formation, member contributions to a common fund, individual loan disbursements, and group repayment performance.

Social impact measurement is built into the rail. Each microfinance program defines target impact metrics — such as poverty alleviation, women’s economic empowerment, or small business creation — and the platform tracks progress against these metrics through borrower surveys, repayment data, and economic indicators.

The rail integrates with the Waqf and Sadaqah rails to enable blended funding models where Waqf endowment income or Sadaqah donations subsidize microfinance operations, covering administrative costs and absorbing defaults so that the Qard Hasan pool remains sustainable.

Endpoints

Create Qard Hasan Loan

POST /v1/rails/microfinance/loans

const loan = await iof.microfinance.createLoan({
  type: "qard_hasan",
  borrower_id: "cpty_borrower_001",
  amount: 2000,
  currency: "USD",
  purpose: "small_business",
  purpose_description: "Purchase of sewing equipment for tailoring business",
  repayment_terms: {
    installments: 12,
    frequency: "monthly",
    grace_period_months: 1,
  },
  service_fee: 40,
  group_id: "grp_village_003",
});

Response:

{
  "id": "mfl_xyz",
  "type": "qard_hasan",
  "status": "PENDING_APPROVAL",
  "amount": 2000,
  "currency": "USD",
  "service_fee": 40,
  "total_repayable": 2040,
  "purpose": "small_business",
  "borrower_id": "cpty_borrower_001",
  "group_id": "grp_village_003",
  "repayment_schedule": {
    "installments": 12,
    "installment_amount": 170,
    "frequency": "monthly",
    "first_due_date": "2024-03-01"
  },
  "created_at": "2024-01-15T10:30:00Z"
}

Get Loan

GET /v1/rails/microfinance/loans/:id

List Loans

GET /v1/rails/microfinance/loans

Approve Loan

POST /v1/rails/microfinance/loans/:id/approve

Disburse Loan

POST /v1/rails/microfinance/loans/:id/disburse

Record Repayment

POST /v1/rails/microfinance/loans/:id/repayments

Create Lending Group

POST /v1/rails/microfinance/groups

const group = await iof.microfinance.createGroup({
  name: "Al-Amal Women Entrepreneurs",
  type: "solidarity",
  max_members: 10,
  common_fund_contribution: 50,
  contribution_frequency: "monthly",
  facilitator_id: "user_field_officer_001",
});

Get Group Performance

GET /v1/rails/microfinance/groups/:id/performance

Record Impact Metrics

POST /v1/rails/microfinance/programs/:id/impact

Get Impact Report

GET /v1/rails/microfinance/programs/:id/impact

Loan Types

Type	Description
`qard_hasan`	Interest-free benevolent loan
`murabaha_micro`	Small-scale Murabaha for asset purchase
`salam_micro`	Advance payment for agricultural produce
`service_ijarah`	Micro-leasing for equipment

Loan Status

Status	Description
`PENDING_APPROVAL`	Loan application submitted
`APPROVED`	Approved, pending disbursement
`DISBURSED`	Funds released to borrower
`REPAYING`	Active repayment in progress
`COMPLETED`	Fully repaid
`DEFAULTED`	Borrower unable to repay
`WRITTEN_OFF`	Loan forgiven (absorbed by Waqf/Sadaqah)

Impact Categories

Category	Metrics Tracked
`poverty_alleviation`	Income change, asset ownership
`women_empowerment`	Female borrowers, business ownership
`education`	School enrollment, training completion
`health`	Healthcare access, insurance coverage
`small_business`	Jobs created, revenue growth

Integration Points

Waqf Rail — Waqf income funds Qard Hasan pools
Sadaqah Rail — donations cover administrative costs and defaults
Payments Rail — disbursement and repayment processing
Ledger Rail — loan balance tracking and accounting
KYC Rail — simplified KYC for microfinance borrowers
Reporting Rail — regulatory and impact reporting

Webhooks

Event	Description
`microfinance.loan.created`	Loan application submitted
`microfinance.loan.approved`	Loan approved
`microfinance.loan.disbursed`	Funds disbursed to borrower
`microfinance.repayment.received`	Repayment installment received
`microfinance.loan.completed`	Loan fully repaid
`microfinance.loan.defaulted`	Loan marked as defaulted
`microfinance.group.created`	Lending group formed
`microfinance.impact.reported`	Impact metrics recorded

Standards

Next Steps

Waqf Rail - Endowment funding for microfinance
Sadaqah Rail - Charitable support for defaults
Payments Rail - Disbursement and collection