Quote from: TheWinnerBro on January 30, 2018, 03:42:25 PM

I think this is an excellent area of exploration. However i have a few reservations, how will you compensate for loans that default ? If you don't charge anything for lending out money your net result will be negative.

I myself have studied both Islam, Judaism, and Christianity, and i do know all of the 3 have historically played with the devils advocate... The Christians outsourced usury to Jews when the pope demanded end of interest, and i do know that todays modern "Islamic Banks" (are not Islamic at all) those banks "resell properties at a premium for longerterm periodic payments" making it equal to usury (but on paper they can say "hey we're 100% Sharia we don't charge interest!").

The way i see it, the bank together with potential investors/bank could do as you say "joint venture" with a client who requests a loan, making it a "equity investment" which should be 100% Bible/Koran compatible if the investment appreciates in value investors, the client and the bank profit, if it declines all the 3 parties share the loss (this also seems as most ethical form of banking). Now, this makes sense. But it gets complicated, you plan to offer this service to anyone ? (some anonymous person can request an investment in a project, commerical or consumer) ?

I think this seems like a very risky business. How will you deal with reducing fraud/abuse ?

Yes, your concerns are very relevant. The Islamic Bank of Bitcoin which I used to be involved in is no longer active. Currently we are working on a new variation which addresses some of your concerns called 'Ummati.'

1- In order to reduce risk of default, we are developing algorithms based on mobile phone data and requiring that anyone requesting financing has a certain amount of backing from others. In the event of default, their friends and family who pledged support are liable, and are all excluded from receiving financing in the future if they do not make good on their pledges. This approach has been up to 98% effective in the Phillipines, we are currently working on deploying it in Indonesia.

2- the structure of financing, as you said, is based on equity or an ownership share in the venture by investors. Rather than making monthly payments, each ownership share carries the right to a percentage of profits. Profits are payed into the contract until the person receiving financing has completely bought back all the ownership shares.

3- security is based first on ID verification (selfies, government ID, mobile phone data) and secondly field agents who take a percentage of profits and have outstanding track records of picking successful projects. This allows for the leveraging of local/customary law which is often very important in areas where micro loans are made.

You can check out more info and are welcome to offer advice and join the discussion. This is the thread here on the forum.

https://bitcointalk.org/index.php?topic=2137399.0