Conventional microfinance has helped millions of people around the world access small business capital — but it comes with a serious problem for Muslim entrepreneurs: interest (Riba). Islam unambiguously prohibits Riba in all its forms, leaving countless Muslim business owners either trapped in poverty or forced to compromise their faith to access credit.
Compassion Fund’s Startup Support programme offers a different path: interest-free microfinance grounded in Islamic finance principles.
What Is Riba and Why Does It Matter?
Riba refers to any unjust increase in lending — the excess charged over and above the principal of a loan. The Quran addresses Riba directly and sternly:
“Allah has permitted trade and forbidden Riba.” — Quran 2:275
For a Muslim entrepreneur seeking to grow a halal business, taking an interest-bearing loan creates a spiritual burden that can undermine the very purpose of their work. The absence of Shariah-compliant small business finance is one of the most significant barriers to economic participation for Muslim communities globally.
How Interest-Free Microfinance Works
Through our Qard Hasan (benevolent loan) model, Compassion Fund provides capital to vetted entrepreneurs with no interest, no hidden fees, and no compounding charges. Recipients repay the principal over an agreed period, and repaid funds are recycled into new loans — creating a self-sustaining pool of community capital.
We also offer Murabaha arrangements for asset purchases, where we buy equipment or inventory and resell it to the entrepreneur at a fixed, agreed markup — eliminating interest while enabling capital access.
Who Qualifies?
Our programme targets Muslim entrepreneurs in low-income communities, particularly women-led businesses, recent graduates with viable ideas, and established micro-businesses seeking to expand. Applicants must demonstrate a viable business plan, community references, and commitment to halal operations.
The Impact So Far
Since 2019, we have funded 340+ businesses across 12 industries in 18 countries. Our portfolio businesses generate an average of 3.2 jobs each. The repayment rate exceeds 91% — demonstrating that trust-based, values-aligned finance outperforms conventional models.
