What is Islamic Halaal Banking? How to Qualify & Get Islamic Bank Loan & Finance Without Interest in Nigeria


Islamic finance is quite new to the Nigerian banking space, but it’s growing at a very fast pace. Thanks to the founding of new Nigerian Islamic Banks like Jaiz, Taj Bank, and Lotus, the true Islamic methods of practicing banking are becoming more and more relatable in our contemporary Nigerian banking industry.

What is Islamic Finance/Halaal Finance?  It is simply practicing banking, lending, and borrowing in the original Islamic way – which prohibits interest rates on loans and profiteering off borrowers. 

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Some rules and principles for borrowing, saving, and lending have since been laid out by the founding fathers of Islam. One of those forbidden practices – charging interest rates on loans, is ironically the biggest pillar of conventional banking Islamic banking, instead, encourages mapping out a sharing formula on proceeds of the business done with the loan.

The Islamic Banking principles term the bad practices, however conventional, haram. One of the harams – charging high rates on loans is called Usury, while ‘Riba’ roughly translates to the ill-gotten growth a lender gets from their borrowers’ toil. Islam principles suggest that a lender should only benefit from the growth and profit of their borrower – they should not suffer because you have lent to them.

In this article, I will share the types of Islamic loan products, why Islamic banking? how to confirm if you qualify for an Islamic bank loan in Nigeria, and what you need to do to access an Islamic loan from a lender.

Why Choose an Islamic Bank as Your Lender?

You can choose Islamic Banking for an array of reasons. The different feel of genuine concern for the growth of the business which you are borrowing for is the most exceptional reason to choose an Islamic Bank.


Here are other reasons:

  • You get to pay ZERO interest
  • Risks are shared
  • Promotes Islamic values e.g Halaal banking’s zero tolerance to alcohol, betting, prostitution, etc
  • Allows business growth

Types of Islamic Loans

I will highlight the types of Islamic loans that are accessible in the selected Islamic Banks in Nigeria, and also mention their equivalents in the conventional commercial bank.

Musharaka (Joint Venture/JV)

In this transaction, both the Islamic Bank (lender) and the borrower contribute to funding the purchase of an asset/machinery. Then, once the asset starts generating income, the profit off it is shared in pre-arranged percentiles.

Murabaha (Cost-plus financing)

In this loan type, the Islamic Bank (lender) simply buys an asset/resource that has been identified by their borrower from a third party and then leases the resource out to the borrower at the original cost price + a considerable profit margin.

Ijara (Lease finance)

In this loaning arrangement, the lender (Islamic Bank) funds the cost for the purchase of an appliance, a piece of machinery, a plant, a vehicle, or any other resource the borrower wishes to acquire. 

Then, a mutually beneficial profit-sharing plan is worked out between the lender and borrower.

Wakala (Agency Contract)

In this setup, the muwakkil (the principal/contract employer) appoints the wakeel (agent) to perform a specific contract on their behalf. Then the proceeds of the contract are mutually shared amongst the parties. 

The entire essence of this arrangement is to ensure the protection of the interests of all the parties involved. Just think – Letter for Credit.

How to know if you qualify for finance from an Islamic Bank

If you already bank with one of the very few Islamic Banks in Nigeria, you have already taken the first step to qualifying for finance from them. However, here is a list of basic things that must be in place to ensure that your finance application won’t get rejected:

  • Your business must promote Halaal – not haram
  • Your purpose for seeking finance must be certified profitable.
  • Your business is registered under the extant law of the land

How to get finance/loan from an Islamic Bank in Nigeria

Islamic banks do a lot of due diligence when profiling the companies they deal with – the most rigorous in the entire banking industry. 

Understandably so, because a lot of companies out there try to pretentiously fit their business models into the Islamic tenets simply because of the perks. The banks do this to sieve the shaft out.

However, what you basically need to get the finance request rolling are:

  • Your company bio
  • A request letter
  • Evidence of previous jobs done (if required)
  • Cash flow projections (12 months)

tags: Islamic banking, halaal banking in nigeria, Islamic bank loans, taj bank, lotus bank, jaiz bank

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