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Non-Interest Loans: What They Are and How to Get Them

Non-interest loans, or interest-free loans, offer a burden-free financial solution without interest charges. Unlike traditional loans, they focus solely on repaying the principal amount. Interest-free loans gained popularity for aligning with ethical, religious, or personal beliefs. In this article, we explore what they are, how they work, and their benefits for borrowers.

In some instances, non-interest loans may come with some fees such as processing fees or late payment fees.
It’s worth noting that while Islamic banking and non-interest loans are more prevalent in northern regions of Nigeria, there are also Islamic finance institutions operating in other parts of the country to cater to the growing demand for Sharia-compliant financial services.

Key features and characteristics of non-interest loans

Financial institutions structure these loans in a way that aligns with Islamic principles, which prohibit the charging or earning of interest. Instead of charging interest on the loan amount, the lender and borrower enter into a partnership or joint venture arrangement, where they share the profits or losses between them based on agreed-upon terms.

Some of the key features of non-interest loans include.


With non-interest loans, lenders and borrowers engage in a profit-sharing arrangement. The lender provides the capital required, while the borrower utilizes it for specific purposes such as starting a business or financing a project. This arrangement encourages a partnership-like relationship between the lender and borrower. As the venture progresses, both parties share the profits generated based on predetermined ratios or percentages.

Asset-Based Financing

Non-interest loans often rely on asset-based financing to provide security for the lender. In this structure, tangible assets or collateral are utilized to secure the loan. The lender retains ownership of the assets until the borrower repays the loan. This arrangement ensures that the lender has a tangible recourse in case the borrower is unable to fulfil their repayment obligations. By linking the loan to specific assets, both parties have a clear understanding of their respective roles and responsibilities.


Non-interest loans not only involve profit-sharing but also incorporate risk-sharing. Both the lender and borrower mutually assume the risks associated with the venture or project. This arrangement fosters a sense of shared responsibility and encourages the parties to work together in minimizing risks and maximizing success. If the venture incurs losses, the lender and borrower share the loss in proportion to their agreed-upon ratios or percentages. Such risk-sharing arrangements promote transparency and fairness in the lending relationship.

Prohibited Elements

Non-interest loans adhere to Sharia principles, which prohibit the charging or payment of interest. This prohibition stems from the belief that interest-based transactions can lead to economic imbalances and exploitation. Islamic finance also prohibits investments in businesses that the Islamic law considers unethical or harmful, such as gambling, alcohol, or pork. By adhering to these principles, non-interest loans provide an alternative financial system that aligns with the values and beliefs of individuals seeking ethical and responsible financial solutions.

Socially Responsible Investments

Non-interest loans are closely associated with socially responsible investments. Islamic finance emphasizes ethical and responsible investing, focusing on ventures that bring positive social impact and align with Islamic principles. Non-interest loans often support projects in sectors such as renewable energy, affordable housing, healthcare, and education, among others. By promoting socially responsible investments, non-interest loans contribute to sustainable development and the well-being of communities, while adhering to the ethical guidelines outlined by Islamic principles.

While financial institutions operating under Islamic banking principles primarily offer non-interest loans, some conventional financial institutions may also provide similar products to cater to customers preferring interest-free financing options.

Where to get a non-interest loan in Nigeria

To get a non-interest loan, you will need to meet the eligibility requirements of the lender. These requirements may vary depending on the lender, but they typically include having a good credit history and being able to provide proof of income.
Here are some places where you can get a non-interest loan in Nigeria:

1. Microfinance banks

A few Microfinance banks in Nigeria offer non-interest loans to small businesses and individuals. They typically have lower interest rates than traditional banks, and they may also offer other services, such as savings accounts and insurance.

2. Islamic banks

Islamic banks are the primary source of non-interest loans that are based on Islamic principles. They call these loans ‘Qard al-Hasan’, and they are interest-free.

3. Government-backed loan programs

The government of Nigeria offers a number of loan programs to help small businesses and individuals. These programs typically have lower interest rates than traditional loans, and they may also offer other benefits, such as government guarantees.

4. Non-governmental organizations (NGOs)

Some NGOs offer non-interest loans to people in need. These loans are to help people start their own businesses or to cover the cost of education or healthcare.

Tips for getting a non-interest loan in Nigeria.


Do your research.

Before you apply for a loan, it is important to do your research and compare the different lenders that offer non-interest loans. This will help you find the best loan for your needs. Visit nairaCompare to compare loan rates and select the one that’s best for you!

Be prepared.

When you apply for a loan, be ready to provide the lender with all of the information they need to make a decision. This includes your financial information, your need for a loan, and your repayment plan.


Build your credit history.

If you have a good credit history, you will be more likely to be approved for a loan. You can build your credit history by paying your bills on time and keeping your debt levels low.


Banks offering non-interest loans.

There are a number of financial institutions offering interest-free loans to Nigerians with a special focus on SMEs. While some of them are backed by the Central bank of Nigeria, others are owned and run by private individuals.

NIRSAL Microfinance Bank

The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL Plc.) is a US$500million Non-Bank Financial Institution wholly owned by the Central Bank of Nigeria (CBN).
It was to, among other things, share agribusiness-related credit risks in Nigeria.

Jaiz Bank

Jaiz Bank PLC is the premier Non-Interest Bank in Nigeria commenced operations on the 6th of January 2012 on a foundation of trust, professionalism and excellence to deliver innovative financial solutions and exceptional customer experience.
The bank has several interest-free loans to support businesses and individuals in Nigeria including the Jaiz Bank Personal Loan Household Appliance Finance (Murabaha).

Taj Bank

As part of its product offering, Taj Bank has Cost Plus SME Finance known as Murabahah under its development financing.
With this product, farmers, small business owners, traders are arranged in a cluster cooperative for them to access loan without interest.

Lotus Bank

Lotus Bank is a Non-Interest Nigerian Bank rooted in ethical banking and investing.
The bank deepens financial inclusion and broadens the array of non-interest products available to the banked, unbanked, and under-banked population.
Its non-interest banking products include equity-based contracts, fee-based contracts as well as sale-based contracts.

Visit nairCompare to know more about non-interest loans, savings and other available loan offers.


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