Shari’aa-based LARIBA RF model requires that the RF institution service
the RF facilities it originated and that it cannot sell the servicing of those
facilities to another company. When the RF institution services its facilities,
community members who are well-trained and who understand the RF fi-
nance concepts, community values, culture, and languages are not only
ready to serve and respond to inquiries, but also trained in the important
Judeo-Christian-Islamic valueof mercifulness and kindness (tarahum)to
those in need.
Sources of Funds Used in RF Financing One of the biggest challenges to
our effort to popularize RF financing in the United States has been the avail-
ability of capital. When we started in 1987, it was very difficult to raise the
necessary capital. We were faced with many challenges. The first and most
important challenge was the noveltyof the effort. Many members of the
community had talked about having a bank or a financial institution that
serves our community, which is one of the most underserved by the banks
and financial institutions because of the prohibition of riba. However,
when many of these community members were contacted to invest, they po-
litely regretted, with many excuses.
The other approach we thought of trying was to start a public drive to
raise capital. That option was very expensive because it required the use of
very expensive attorneys and SEC registration fees, which we could not af-
ford. In addition, we did not have a proven track record of a working model
with tangible results. It was simply a venture capital project that needed
high-risk capital—and it is known that high-risk capital comes at a very
high price.
We also thought of starting or acquiring a bank. This would have been
a wonderful solution, because all depository institutions are allowed to take
deposits that can be used to finance different projects. However, that was a
formidable task because we did not have the capital or the qualified staff
that could be certified and accepted by the regulators.
On another front, we went through the process of applying to start a
credit union and we were very close to receiving a charter. However, after
reading the details of how a credit union works, we found that every deposi-
tor is considered a shareholder. We found that regardless of the size of the
deposit, each individual represents a vote. We became very concerned due
to prior experiences in the field of political manipulations of elections and
voting in many nonprofit organizations. We discussed the matter and de-
cided to back off.
We finally decided to start a small finance company, organized as a
small—Subchapter S—corporation. This option had its advantages and
disadvantages. The main advantage was the flexibility of raising the
RF Banking Model for the 21st Century 271