Last Updated on November 23, 2021 by Ope Quadri
One of the ways for a business owner to quickly achieve their entrepreneurial goals is to get access to a soft or an interest-free loan, but most of the financial institutions around the world make a profit from interest on a credit facility.
However, some financial institutions are gradually embracing Islamic tenets of banking, luckily, Nigeria has four of such banks that operate non-interest banking.
While you’re considering a non-interest loan for your business, do you also know that there are result-driven ways to get a loan for your business? The tips are available at: https://infomediang.com/ways-getting-business-bank-loan
Interest is an additional amount someone paid on a loan that was honoured and executed by the financial institution or creditors.
For instance, Mr Zak takes N50,000 loan with an interest rate of 5% per month from ZJ Bank.
5% of N50,000 translates to N2,500. It means Mr Zak will repay N52,500 to his bank, the creditor. The interest is N2,500, that’s the additional amount he pays.
In a non-interest bank which is also called an Islamic bank, interest on a loan doesn’t apply.
Non-Interest banks forbid charges on loans, frowns at gambling and any forms of speculative behavior in business transactions or funding.
Wondering how they make profit?
Non-Interest Banks make a profit through trading contracts, leasing contracts, and other financial services that conform to Islamic tenets.
Which financial institutions in Nigeria operate non-interest banking?
At the time of publication, there are four non-interest banks with licences from the Central Bank of Nigeria. They are:
- Jaiz Bank PLC
- Sterling Alternative Finance
- Taj Bank
- LOTUS Bank
Jaiz Bank PLC
Founded in 2003, Jaiz is a pioneer non-interest bank in Nigeria with its headquarters in the Federal Capital Territory, Abuja.
It was founded by one of the most successful bankers in Nigeria, Alhaji Umar Mutallab. He is also a former minister under the military regime of Gen Murtala Muhammed and Gen. Olusegun Obasanjo and was the Chairman of First Bank of Nigeria until he established Jaiz Bank.
The bank has several interest-free loans to support businesses and individuals in Nigeria including home financing called IjarawaIqtina.
With branches spread across state capitals, more about some interest-free loans you can get from the first Islamic bank in Nigeria can be found at: jaizbankplc.com/jaiz-product-and-services.
Sterling Alternative Finance
Sterling Alternative Finance (SAF) got its operating licence from the CBN in 2014 to offer non-interest banking to Nigerians. It has agrifinance and MSME where you can enjoy non-interest loan.
Under SAF MSME credit facility known as alternative business, AltBiz for short, it is designed specifically to cater for stock financing needs and you can get up to N3,000,000 interest-free with just 20% commitment deposit and privilege to make repayment weekly, every 30-day, every three-month, or 180-day .
With the alternative banking plus non-interest financing services, you can get loan of N500,000 by depositing N100, 000 as commitment, more at: saf.ng
It is owned by Sterling bank with its office at 20 Marina Rd Lagos Island, Nigeria.
With other products like Ijarah (lease) for Asset Financing, Murabaha (purchase and resale at a mark-up), SAF is the second non-interest bank in Nigeria after Jaiz.
With headquarters at Plot 72, Ahmadu Bello Way, Central Business District, FCT, Abuja, Taj is the third financial institution in Nigeria which is operating under Islamic banking principles,
Apart from its different products under its private and retail banking, it offers Cost Plus SME Finance known as Murabahah under its development financing.
Under the Taj Bank’s SME funding, farmers, small business owners, traders are arranged in a cluster cooperative for them to access loan without interest. It is designed for businesses to grow quickly. It was founded in 2019
The bank which is known for its slogan, ‘our only interest is you” can be found at: tajbank.com
The bank received its regional operation licence from the CBN on July 21, 2021, and at the time of updating this article, the bank now has four offices (including its head office) in Lagos.
- Non-interest banking system doesn’t impose interest on financing
- Non-interest loan is the best credit facility for SMEs
- Nigeria has four non-Islamic banks
- Jaiz bank founded by Alhaji Umar Mutallab is the first bank in Nigeria to introduce Islamic tenets in banking.