Create a group of community members who pool their cash resources to provide interest-free loans to members to pay off their interest-bearing loans.


Each member will provide a contribution of $50.00 per month to be used for making interest-free loans.
  1. Members can contribute more if they want.
  2. Members can suspend contributions temporarily or permanently.
  3. The balance of each member’s contributions will be maintained.
  4. These funds will be repaid to the members as loan payments are received – see details later.


Each member will submit a list of their car, home, student and parent-student loans, including the loan balance, interest rate, monthly payment and whether the loan interest is tax-deductible or not.

A Loan committee of 3 people elected by the members will meet monthly or quarterly to review the list of loans and available contributions, and select the member loans that should be paid off. The Loan committee will consider the member’s ability to repay the loan in determining if a loan should be selected. The Loan Committee may require a member to furnish credit information like a recent credit report, proof of income, bank statements, etc.

Generally, loans with higher interest rates will be given preference. If the interest rates on two loans is close the loan with the lower balance and/or faster repayment will be given preference. An aging process will be applied to give preference to older loan applications over recent loan applications.

Normally, only those loans will be considered that can be funded using existing available funds and the expected contributions in the next 2 months. However,the Loan committee may include expected contributions in the next 4 months if the interest rate differences between the different loans are significant. Also, the borrower must be not be behind on the existing loan payments and must have made payments for at least 6 months.

For example
  1. A loan of $3000.00 will be given preference over a loan of $10,000.00.
  2. A loan of $3000 with a monthly payment of $300.00 per month will be given preference over a loan of $2500.00 with a monthly payment of $100.00.
A member cannot get a new loan until all previous loans have been paid back.

If the Loan Committee does not have enough funds to pay off the selected loan, the Loan Committee may inform all members by email about the amount of additional funds needed to pay off the selected loan, and will wait two weeks for any new funds, and meet again to issue the loan if enough funds have become available.

A loan will not be made if the full loan amount cannot be paid off. Also, loans that would require more than 60 months to be repaid are not eligible.

Rules specific to Student Loans

A student may have several different student loans at different rates. The following rules will be used for Student Loans (including Parent Student Loans).

i. The number of different student loans and the total amount the member wants to borrow must be declared and documented when the first loan request is made. For example, if a member has 3 different student loans, all three loans must be submitted when the first student loan request is evaluated by the JIFL Loan Committee.

ii. A member who already has a JIFL student loan will be eligible to get another student loan, from the list of the student loan requests submitted originally, as long as the member's other student loan requests meet the JIFL loan request selection criteria (e.g. having the highest interest rate among all outstanding loan requests and JIFL having the funds required).

iii. The total JIFL loan amount that may be outstanding for student loans made to one member is limited to $40,000.00. E.g. If the member's current JIFL loan balance for all JIFL student loans is $35,000.00, the maximum amount that may be loaned to this member, for an eligible student loan request, is $5000.00.


A member who receives the interest-free loan from the group will make monthly loan payments to the group. The monthly payment will be the same as that of the original loan unless the member agrees to a higher amount. The member may choose to make higher subsequent payments.

For example,
  1. Imran has a car loan from a bank for $3,000.00 with a monthly payment of $300.00 per month.
  2. The group loans $3,000.00 to Imran.
  3. Imran pays off the bank loan.
  4. Imran starts making loan payments to the group for $300.00 per month until the group’s loan is paid off.


Loan repayments received from a member will be used to refund the contributions made by the members who contributed to the loan. The contribution refund amounts for each member will be based on the ratio of the member’s contributions used for funding the original loan.

For example,
  1. The group uses contributions of $1,000, $1,500 and $2,500 from Hasan, Hyder and Kumail to make a loan of $5,000 to Imran in January 2008.
  2. Imran makes a loan repayment of $100.00 in February 2008.
  3. The Contribution Refund amount for Hasan would be would $20: $100 divided by $5,000 (total contribution of $1,000 + $1,500 + $2,500), multiplied by $1,000 (Hasan’s contribution).
  4. Similarly, the contribution refund amounts for Hyder and Kumail would be $30 and $50 respectively.


The contribution refund amounts due to each member will normally be paid back to the member once a month.

If a member has an existing loan from the group, the contribution refund amount due to the member will be used as an additional loan payment for the member’s existing loan.

Payments for contribution refund amounts will be made only if the amount exceeds $20 for members contributing via electronic bank deductions. For others, refunds will be made when the refund amount exceeds $50.


The operating expenses should be small. The group may charge an equal amount of fee to each member who has any available contribution or contribution refund amount. At this time, a fee of $1.00 per month will be added to each member’s monthly contribution amount.


There may be times when a member is unable to make the loan payments on the agreed schedule, and there may also be times when a member cannot make any more loan payments.

The Loan Committee will decide if the member should be given extra time to make the payments. The Loan Committee may also reduce the monthly loan payment amount.

A loan payment will be considered in default if it is overdue by more than 2 months. The Loan Committee will review each Loan Default situation and determine any action to be taken. If the Loan committee determines that legal steps are necessary, the group may choose to take legal steps if approved by at least 60% or more of the members who contributed funds for the loan in default.

A member who contributed to the loan in default may choose to take individual legal action against the member in default but the group nor any other member will be responsible for any expenses for carrying out such individual legal action.


A new member will be added when the person
  1. is recommended by 2 existing members, and
  2. The Loan Committee approves the new member. The Loan Committee must apply any new member criteria approved by the group’s members
The purpose is to add new people who are well known by some of the existing members, and are known to be responsible Muslims.


For transparency reasons, the following will be reported by the Loan Committee every month, via email or website:
  1. Total new Contributions received, Loan Repayments received and Contribution Refund payments during the last month.
  2. New Loans approved for the last month, including the loan amounts, interest rate of the member’s original loan and monthly loan payment amounts.
  3. Total number and amount of payments in default for the last month.
  4. Total Expenses Fees for the last month.
  5. Number of active members at the end of last month.
  6. Contribution balances, loan balances, Contribution refund due balances for each member (without the member’s name or other identification information) at the end of the last month.
Each member will get, via the group’s website or email, the list of recent transactions for the member, including contributions, loans, loan repayments, contribution refunds and operating expenses.

Each member will also be able to review the list of recent transactions for the group, without the related name of the individual members.

The names of members receiving new loans will not be shared as part of the general information available to all members. Members who wish to know the names of members awarded new loans in the last 12 months as well the loan amounts, the original loan’s interest rate and monthly payment amounts can do so by contacting a member of the Loan Committee in person. Members who get this information will have to keep it confidential and not share this information with other members or anyone else. The purpose of this process is to keep this information as confidential as possible.


The group will set up a non-profit organization to carry out the operations described above. Each member will use his/her contributions to make personal loans to other members; the organization will facilitate this process. Each member empowers the organization to carry out these operations on behalf of the individual member.

  1. The organization will collect contributions and loan repayments, and pay the operating expenses.
  2. Enter into loan agreements with members receiving loans, on behalf of each individual member contributing funds for the loan.
  3. Take any legal action, on behalf of the members, related to the operations of the organization.
  4. Maintain the balances and transactions for each member.
  5. Pay contribution refunds.


A set of by-laws for the organization will be put together to govern the operation of the organization. These by-laws will define how changes will be made to the loan rules, membership rules, etc.


Aging process for loan applications To give preference to earlier loan applications versus new loan applications, an aging process will be applied to all older loan applications, as below.
  1. Any loan requests that exceed the available funds will be excluded.
  2. For each of the remaining loans, the current loan balance amount will be divided by 60 and multiplied by 60 less the number of quarters since the loan application was made. The resulting amount will be used as the loan balance amount when comparing the loan applications.
For example,
  1. Imran applied for a $10,000.00 loan in the 2nd quarter of 2006, Kumail applied for a $6000.00 loan in the 2nd quarter of 2006 and Hasan applied for a $4,800 loan in the 2nd quarter of 2007
  2. The Loan Committee is evaluating loans during the 3rd quarter of 2007 and has $5,000 available to loan.
  3. Imran’s current loan balance is $8,000.00, Kumail’s current loan balance is $4,800.00 and Hasan’s current loan balance is $4,500.00.
  4. No aging is applied to Imran’s loan since $8,000.00 exceeds the available to loan amount of $5,000.00.
  5. The age of Kumail’s loan application is 5 quarters, from the 2nd quarter of 2006 to the 3rd quarter of 2007. Kumail’s aged loan amount is the current balance of $4,800.00 divided by 60 and multiplied by 55 (60 – 5), which is $4,400.00.
  6. The age of Hasan’s loan application is 1 quarter. Hasan’s aged loan amount is the current balance of $4,500.00 divided by 60 and multiplied by 59 (60 – 59), which is $4,425.00.
  7. Kumail’s loan has a lower aged amount and it would be selected.
  8. Since the aged amounts are close, the Loan Committee could decide to select Hasan’s loan if Hasan has a higher interest rate or his monthly payment amount would pay back his loan faster.