Non-Interest Loans: Top 4 Nigerian Banks Offering Reliable Options

Did you know that non-interest loans in Nigeria are growing at an unprecedented rate in the Nigerian banking sector, according to a survey conducted by Aloinettadvisors

Banks that adopt this approach are known as Non-interest Financial Institutions (NIFIs) and are categorized as Specialized banks (Banking and other Financial Institutions Act 1991, as amended).

With over 112 million Nigerians facing financial challenges by Oxfam, these non-interest loans are helping to provide affordable and ethical financing to those who need it most. By eliminating interest charges, these loans make it easier for borrowers to manage repayments without the financial burden associated with conventional loans. 

In this article, we’ll explain what non-interest loans are, why they’re becoming popular in Nigeria, the top banks providing these loans, and how you can be eligible for a non-interest loan.

What Are Non-Interest Loans?

A non-interest loan is a type of loan where the borrower only repays the principal amount borrowed with no additional interest charges. These loans align with Islamic finance principles, which prohibit charging interest on loans.

Non-interest loans are beneficial because they avoid compounding interest, which can increase debt over time. Although the Nigerian banking sector has been dominated by interest-based lending, the demand for non-interest loans has increased drastically.

Why Non-Interest Loans Are Popular in Nigeria

Nigeria has a significant Muslim population, especially in the northern regions where interest-free financial products are in high demand. However, non-interest loans have become popular with a much larger audience because they offer affordability and flexibility.

Lower Financial Burden: These non-interest loans reduce the total repayment amount by making them attractive for individuals and businesses with limited financial resources.

Ethical Financing: Non-interest loans are appealing to borrowers who prefer ethical financing options that align with their personal or religious beliefs.

Support for Entrepreneurs: Non-interest loans have played a significant role in supporting small businesses and startups, which often struggle with the high interest rates on conventional loans.

How to Apply for a Non-Interest Loan in Nigeria

Applying for a non-interest loan in Nigeria generally involves a straightforward process. Here’s a step-by-step guide to help you get started:

• Research Banks and Products: Choose the bank and loan product that best suits your needs, whether it’s a personal loan, business financing, or home mortgage.

• Check Eligibility: Ensure that you meet the bank’s criteria, including income requirements and any religious or ethical guidelines tied to loan use.

• Gather Documentation: Prepare important documents such as identification, proof of income, and, if needed, a business plan.

• Submit Application: Visit a branch of your chosen bank, or apply online if available and submit the application along with your documents.

• Await Approval: The approval time may vary depending on the type of loan and the bank’s requirements. Generally, the process is quicker than traditional loans due to the structured financing model.

Top Nigerian Banks Offering Non-Interest Loans

According to Nairametrics,  there are about four non-interest banks in Nigeria. Alternative Bank Limited, JAIZ BANK PLC, LOTUS BANK LTD, and TAJ Bank.

Jaiz Bank

Source: Jaiz Bank’s official website

Jaiz Bank is Nigeria’s first non-interest loan bank. It was established in 2012 and started operations in Abuja, Kaduna, and Kano and has since expanded. They provide services for people, small businesses, and companies, all based on Islamic principles.

They provide several loan types, such as:

• Murabaha Financing: A trade-based loan where the bank purchases goods and resells them to the borrower at a profit which is agreed upon in advance.

• Ijara Financing: An asset-based financing option similar to leasing, where the bank buys an asset and leases it to the customer.

How to apply for a Jaiz Bank non-interest loan

• Visit a Jaiz Bank Branch

Go to a nearby Jaiz Bank branch. It’s best to speak with a loan officer there who can guide you on the best financing option for your needs.

• Fill Out an Application Form

At the branch, you’ll get an application form to fill out. This form asks for details about your business, why you need the loan, and how you plan to use it.

• Prepare Required Documents

You’ll need to provide some documents with your application, which usually include:

1. Your business registration certificate
2. A profile of your business
3. Financial records, like bank statements (last 12 months)
4. A business plan and cash flow budget
5. Proof of identity (e.g., passport or driver’s license)
6. Proof of address (e.g., utility bill)
7. Details of any collateral (if required)

• Submit Your Application

Hand in your completed form and documents to the loan officer at Jaiz Bank. They will review your application and check your business’s suitability for financing.

• Wait for Approval

Jaiz Bank will evaluate your application based on their requirements. If they approve it, you’ll receive an offer letter outlining the loan terms and conditions.

• Complete Any Final Requirements

If Jaiz Bank approves your loan, you may need to meet additional conditions before the loan funds are disbursed.

• Receive Your Loan

Once everything is approved and the final requirements are met, Jaiz Bank will transfer the funds to you.

TAJBank

TAJBank is another prominent Nigerian bank that gives various non-interest financing options. TAJ provides a range of retail, public sector, SME and corporate banking services.

Source: TAJ Bank official website

TAJ Bank offers different main types of business loans, which are:

• Working Capital Loan (Murabahah): This is for buying goods or materials you need for your business. TAJ buys them for you, and you pay them back later with a small added profit.

• Import Finance (Murabahah): For businesses that buy goods from other countries. TAJ can pay the supplier directly, and you repay TAJ.

• Project or Construction Finance (Istisna): This is for big projects like building or manufacturing. TAJ funds the project, and then you buy it back gradually.

• Guarantees (Kafalah): TAJ provides guarantees (like a promise) to support your business’s credit or reliability.

• Partnership Funding (Musharakah): TAJ and your business share funds, profits, and risks to support a project.

SME Loan (Murabahah for SMEs): Special for small businesses, TAJ helps you buy supplies and equipment. You pay back over time.

How to apply for a TAJ Bank non-interest loan

To apply for a non-interest loan from TAJ Bank:

i. Active customer: To be eligible for a non-interest loan in TAJ bank, you must have maintained an active bank account with TAJ bank for a minimum of 1 year. 

ii. Visit the bank: You can go to the nearest  TAJ Bank branch and ask for a loan adviser who will help you understand loan options and the process.

iii. Complete the form: You can complete the application form, which will ask for details about your business, its history, and the purpose of the loan.

iv. Prepared required documents: You should prepare important documents such as:

Business registration certificate, Bank account statements (usually 12 months), Your ID (passport, driver’s license), financial records, if needed, etc.

v. Submit your application and documents for review: TAJ Bank will look over your business’s history and finances.

Sterling Bank (Alternative Banking)

Sterling Bank offers a suite of non-interest banking options under its Alternative Banking division with its head office in Lagos. 

Source: Sterling bank( Alternative banking website)

i. Business Support Loan: You can get up to N5 million with no collateral required, and it’s ideal for small businesses that need extra funds.

ii. Asset Financing: Helps businesses buy equipment or vehicles with flexible payments.

iii. Group Lending: Loans for groups or associations to fund projects.

iv. Agriculture Loans: Special loans for farms and agribusinesses.

How to apply for Sterling Bank (Alternative Banking) non-interest loan

To apply for a Sterling Bank non-interest (Alternative Banking) loan, follow these steps:

i. Check Eligibility: Make sure your business is registered with the Corporate Affairs Commission (CAC) and meets the bank’s requirements.

ii. Visit the Alternative Banking Section: Go to a Sterling Bank branch or visit their website, specifically the Alternative Banking section for non-interest loan options.

iii. Consult with a Bank Representative: Ask about available non-interest loan products that suit your business needs, such as asset financing or working capital.

iv. Complete the Application: Fill out the loan application form provided by the bank, including your business details and any necessary documents.

v. Submit Supporting Documents: Provide all required documents, like business registration, bank statements, financial records, etc.

vi. Wait for Approval: The bank will review your application and notify you if approved.

Lotus Bank

Lotus Bank is Nigeria’s most recent fully Sharia-compliant bank, and the Central Bank of Nigeria licenses it.

Their non-interest loans are suitable for a variety of needs, including:

i. Auto Finance – Loans for purchasing new or used cars with flexible repayment plans.

ii. Home Appliance Finance – Loans for buying home appliances with flexible repayment terms.

iii. Agricultural Finance – Loans for land, equipment, and working capital for agricultural activities.

iv. Home Financing – Loans for home purchase or construction with long repayment tenures.

v. All-Purpose Finance – Loans for personal and business needs with competitive pricing and zero processing fees.

Source: LOTUS official website

How to apply for Lotus Bank non-interest loan

To apply for a non-interest loan at LOTUS Bank, follow these simple steps:

i. Check Eligibility: Ensure you meet the age, employment, and documentation requirements.

ii. Visit the Bank: Go to a LOTUS Bank branch or apply online through their official website.

iii. Submit Documents: Provide required documents like your payslip, bank statements, proof of address, etc.

iv. Loan Application: Fill out the loan application form with the necessary details.

v. Approval: Once your application is reviewed, you’ll be notified of the decision to approve it.

Benefits of Non-Interest Loans in Nigeria

Non-interest loans are popular because of their unique benefits, which appeal to a wide audience beyond just Muslim customers. Here are some key advantages:

Affordability: Without the added cost of interest, repayments are often more manageable, which helps borrowers keep their debt levels under control.

Lower Risk of Debt Accumulation: Traditional loans can lead to compounding debt, but non-interest loans prevent this and make it easier to maintain financial stability.

Ethical Alignment: Non-interest loans support ethical investment and discourage financing activities that go against principles which are appealing to socially conscious individuals.

Support for Small Businesses: These loans make it easier for entrepreneurs to start or expand businesses without high-interest debt in supporting Nigeria’s growing SME sector.

Conclusion 

Non-interest loans are changing how Nigerians borrow money. Imagine getting a loan for a business home or family needs without worrying about high interest rates. These loans offer real financial freedom and are helping millions build a better future. As more people use non-interest loans, they’re creating new opportunities and making loans fairer for everyone.