GUIDE: How to get a Business Loan in Pakistan without Interest?

Here's everything you need to know!

Animated people standing in front of bank and shaking hands

Starting your business requires significant financing, which isn’t always feasible. Therefore, many people turn to banks to request business loans to invest in their ventures. However, most people are scared to take a bank loan because of the high-interest rates.

Most Pakistanis look for banks that allow an interest-free business loan, keeping in mind the religious perspective. And while many Islamic banks in the country offer this service, there’s always a catch involved.

Here are five initiatives that can help you obtain an interest-free loan for business in Pakistan without any complications:

1. Al-Khidmat Foundation Makhawat Program

Al-Khidmat Foundation introduced the Mawakhat Program, which offers loans to individuals who want to start their own businesses. The mission of this program is to present an Islamic Microfinance model to remove poverty. Under this program, interest-free loans are provided to improve the living standard of low-class people. The organization itself maintains the Islamic rules of banking.

There are two types of schemes:

  • Home-based schooling

The program provides an interest-free loan under home-based schooling. This scheme has already helped 50 families in Karachi by spending 1,542,500 rupees to support low-income individuals.

  • Mobile vocational trainer

Al-Khidmat Foundation Pakistan knows the importance of skills, and through this program, it helps people obtain various skills to succeed in life.

2. Akhuwat Islamic Microfinance

Akhuwat Islamic MicroFinance is a company that provides interest-free microfinance loans to lower-class members of society. Akhuwat Islamic MicroFinance promotes social justice and brotherhood by improving the lives of people.

Eligibility Criteria

The applicant must:

  • Have a valid CNIC
  • Have the ability to run a business at the initial stage
  • Be economically active
  • Should be 18-62 year’s of age
  • Should not have any criminal record
  • Have a good social and moral character.

The applicant needs two guarantors other than a family member for this loan. There are two types of loans under Akhuwat Microfinance.

  • Group Lending

Three or six members participate in group lending. All members of the group provide a guarantee and credentials to each other. Group members solve their social and economic problems through decision-making. Members shouldn’t be relatives; however, they can be residing nearby.

  • Individual Lending

Individual lending is for individuals who fulfill the eligibility criteria. If they satisfy the requirements, they can apply for interest-free loans. The individual will need to provide two guarantors to get loans.

3. Dubai Islamic Business Finance

Dubai Islamic Business Finance is wholly based on sharia’s rules and regulations. DIBPL enters Shirkatul Melk’s relation with its customers. It purchases a share of your residence, leasing your undivided share in the property against monthly rental.

Eligibility Criteria

  • The applicant must be Pakistani.
  • The applicant’s age should be between 26-40.
  • The applicant’s property must be located in Karachi, Lahore, Islamabad, Rawalpindi, Faisalabad, Multan, Bahawalpur, Sialkot, Gujranwala, Hyderabad, and Peshawar.
  • The property’s minimum value must be 2000,000.

Documents Required

Documents for applying to the scheme include:

  • Applicant’s CNIC
  • 2 passport size photographs
  • Tax returns
  • Utility bills
  • Copy proof of profession
  • Bank statement of 12 months
  • Copy of Co-partner’s CNIC

4. IFC Business Finance

IFC is a member of the World Bank Group. Its mission is to remove poverty from society by providing opportunities for people to improve their lives. IFC addresses challenges that affect private sector development; it focuses on providing finance for small and medium enterprises. IFC partnered with financial institutions to facilitate SMEs and stimulate economic growth within the country.

IFC also has dispute resolution centers in Karachi, allowing small enterprises to resolve their problems without going to court. It works with other financial institutions like HBL to facilitate people.

IFC provides services in both English and Urdu. It has successfully increased its small business customers to more than 80,000 new customers.

5. Prime Minister Youth Loan Scheme

PM has started Prime Minister Youth Business Loan to offer loans to unemployed youth. This program motivates educated youth to start their own business.

Terms and conditions

Here are the terms and conditions you should consider before applying for the scheme:

  • Mark-up 6% per annum
  • The maximum loan size will be 2 Million
  • The application fee is Rs. 100
  • Tenure will be 8 years maximum

Requirements of the Scheme

The following are the requirements of the scheme that an applicant must fulfill.

  • Applicants must be of age between 21 and 45.
  • The applicant should be Pakistani with a valid CNIC.
  • An applicant with a new startup will show relevant technical skills/educational degrees.
  • A person who has an existing business will show involvement in the industry and genuine business concern.
  • The loan amount should be equal to or the same as the life insurance of the applicant.
  • The guarantor should have 1.5 times more net worth than the requested income. He should be a government employee for the remaining service of 8 years.
  • The applicant can provide more than three guarantors.

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