Loan For Business In Pakistan Without Interest

Loan for business without interest is the next to impossible thing. However, here in Pakistan, most people want an interest free loan for business due to religious issues. When it comes to the point that someone should take a loan from banks? Is a loan without interest possible? Because in Pakistan, mostly banks take interest on the loan. It is the permanent means of income for banks. Banks earn double money through interest. If banks do not take interest, they can’t survive in the industry.

There are many Islamic banks in Pakistan. They claim interest-free loans to start a business like Meezan Bank. But as we know, the reality is different. They completely try to convince their customer to get a loan. When there is a higher interest rate involved, it takes years to give it back to banks. Many times customers have to pay the price in the form of house, land, and property.

Many NGOs are still working to support small and medium enterprises, i.e., Prime Minister Youth Loan Scheme, Alkhwat; their mission is to help SMEs. They work for the country and people’s welfare. This little effort can boost the country's economy with large domestic products.

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In this article, we will discuss in detail where you can get an interest-free loan for business in Pakistan.

Al-Khidmat Foundation Mawakhat program

Unemployment is a severe matter nowadays. It can cause other severe problems if the unemployment rate increases every year. It can lead to a dangerous increase in poverty and can affect the country's economy as well.

Al-Khidmat Foundation has understood this need. It introduced the "Mawakhat Program", which gives loans to individuals who want to start their business. Many people don’t have access to the conventional banking system. Mostly in Pakistan, people have talent, skills, and motivation. They just only need support and money to start their own business. It is what the Al-Khidmat Foundation does.

This program's objective is to provide an interest-free loan to the needy and poor. It makes people financially independent and strong. This way, they can start their own business. It enables people to earn a respectable income. It is specially designed to help the lower class of society. People who are waiting for respectable earnings need investment. It helps to make them something they want to do in their lives.

Vision

Al-Khidmat's vision is to facilitate the poor in every region of Pakistan.

Mission

The mission of this program is to put an Islamic Microfinance model to remove poverty. It provides interest-free loans to improve the living standard of low-class people. The organization itself maintains the Islamic rules of banking. It makes people sustain in a ruthless economic environment.

This program follows the Islamic teaching and rules and also helps people to gain knowledge, skills, and abilities to start their earning. There are two types of schemes:

1- Home-based schooling

 It provides an interest-free loan. This scheme already helped 50 people support families in Karachi. This program has spent 1,542,500 rupees to support low-income individuals. Alkhidmat Mawakhat Program provides interest-free loans to such companies and individuals, thus empowering people.

2- Mobile vocational trainer

 Al-Khidmat Foundation Pakistan knows the importance of skills, and through this program, it helps people get these skills.

Akhuwat Islamic MicroFinance (AIM)

Akhuwat Islamic MicroFinance is a company that provides interest-free microfinance to lower class members of society. It helps to improve their lives. Akhuwat Islamic MicroFinance promotes social justice and brotherhood.

This program supports various sectors. It promotes quality education. Its mission is to make a poverty-free society. The loan application is always simple to understand. Anyone with little knowledge can fill the form.

Eligibility Criteria

The applicant must have a valid CNIC. He should have the ability to run a business at the initial stage. He must be economically active. The applicant's age should be 18-62. The applicant does not have any criminal record. Besides, he must have good social and moral character.

The applicant needs two guarantors other than a family member. There are two types of loans.

Group Lending

Three or six members participate in group lending. All members of the group provide a guarantee and credential 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 eligibility criteria. If they fulfill the requirements, then they receive interest-free loans. The individual will provide two guarantors to get loans.

Application Submission

When someone submits an application loan process will start. The manager will go through the application. Application fees may change with time. The following are the steps to process the loan application further.

First of all, the Applicant visits the AIM branch. He must have relevant documents. The manager will discuss the applicant if he fulfills the criteria. Staff will provide the loan application, and the applicant will fill it.

The potential candidate will submit the application. The manager will check documents then go for further process.

 Collateral detail is as follows.

• Two guarantors
• Post Dated cheques
• Additional collateral for any special case
• Personal responsibility

Submit the following documents with the loan application

• Latest utility bills
• latest photo
• Copies of applicant' CNIC

Note: AIM may demand more documents as per the change in scheme.

Social Appraisal

A social appraisal is to check the credibility and character of the applicant. When the manager receives an application, he visits the residence of the applicant. He checks the social status of the applicant and collects information from existing borrowers. The manager listens to the Views of neighbors. He also takes interviews of the family members.

Business Appraisal

The next step is the business appraisal. Managers will deeply check the business idea. After the check, he will discuss with other colleagues whether this idea is implementable or not. They will think if this idea can generate profit and payback loan amounts. They interview the applicant's family and get their views about whether they will support the idea.

Second Appraisal

After the social appraisal and business appraisal, the branch manager will conduct interviews with the applicant and guarantors.

Guarantors of Loans   

In the case of an individual, two guarantors guarantee that this person will pay the loan on time. In group lending, applicants give a guarantee of each other.

Loan Approval Committee (LAC)

Every branch has its LAC. They discuss which application to approve which not. The Area Manager is the head of this committee. The Unit Manager and Branch Manager are members of the committee. This whole process takes 3 to 4 weeks.

Fund Request

 LAC approves loans. Regional Manager request for the loan amount. The requested amount is then delivered to banks. Then applicants take a cheque for the loan amount.

Dubai Islamic Business Finance

Dubai Islamic Business Finance is completely based on sharia’s rules and regulations. DIBPL enters Shirkatul Melk's relation with its customers. It purchases a share of your residence. In this way, it leases your undivided share in the property against monthly rental. It fulfills all sharia manners.

This product is available for both new and those already getting finance from other banks. It the best way to obtain finance from Islamic banks.

Why is Dubai Islamic Business Finance the right choice?

It is the only type of product available that follows Islamic principles. It provides 500,000 to 20 million financing amounts and has a fast application processing time. This scheme provides 70% of your property value. Tenor rescheduling option is also available.

However, terms and conditions may apply to get the loan.

Eligibility Criteria

The applicant must be Pakistani. Applicant's age should be between 26-40.

Property Criteria is that it 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 the scheme include Applicant's CNIC, 2 passport size photographs, tax returns, utility bills, copy proof of profession, Bank statement of 12 months, and copy of Co-partner's CNIC.

IFC Business finance

IFC is a member of the World Bank Group. Its mission is to remove poverty from society. It provides opportunities for people to improve their lives. IFC addresses challenges that affect private sector development.

IFC focuses on providing finance for small and medium enterprises. SMEs are the backbone of Pakistan's economy. Small and medium enterprises often struggle to get finance. They’re a source of providing jobs to the lower class. Thus, IFC partnered with financial institutions to facilitate SMEs. It helps to stimulate economic growth within the country. IFC made a collaboration with HBL to create jobs in 2009.

There are almost 3 million small and medium enterprises working in Pakistan. It contributes 30% to gross domestic product. These enterprises are free from any challenges. They have to take loans from banks. Investment from the bank is quite risky. Many enterprises face loss due to a lack of basic training. Many commercial disputes between firms drain their finance.

For this reason, small enterprises only employ not more than 5 people. In Pakistan, only 4% of enterprises reach their 25th birthday. IFC also does advisory work.

It has trained 4400 entrepreneurs. The organization has made dispute resolution centers in Karachi. It allows and helps the smaller enterprise to resolve their problem without going to court. It works with other financial institutions to facilitate people. An excellent example of IFC is to work with HBL. Loans help to expand the business. It provides help in trading across borders.

IFC provides services in both English and Urdu. It has successfully increased its small business customers to more than 80000 new customers.

Prime Minister Youth Loan Scheme

The government aims to make people financially independent. PM has started Prime Minister Youth Business Loan. A large number of people can benefit from this scheme. The purpose of the Scheme is to offer loans to unemployed youth. This program motivates educated youth to start their own business.

Today youth is very motivated and innovative. This program's mission is to facilitate such youth in terms of money. It lets people save their future. The Government of Pakistan launched this scheme for better employment opportunities. This scheme will also play a vital role in growing the economy. Moreover, this scheme is for people who want to start their new business or want to grow their existing business.

Terms and conditions

But before you apply this scheme, you should consider about terms and condition features of the scheme. It will help you to get approval for the loan scheme. The following are terms and conditions for the loan scheme.

• Mark-up 6% per annum.
• The maximum loan size will be 2 Million. 
• The application fee is Rs. 100.
• Tenor 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 up with relevant technical skill/educational degrees.
• A person who has an existing business will show up his involvement in the business and genuine business concern.
• The loan amount should equal 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.

It takes almost 15 working days to process if the applicant submits all documents.

Preferred sectors

Preferred sectors for business investment for this scheme are:

• Boutique
• Beauty Clinic
• Interior Decoration
• Medical Store
• Wholesale 
• Dairy Farming
• Poultry Farming
• Meat Shop
• Auto and Tractor parts manufacturing
• Furniture Manufacturing

If you want to get interested in free finance to start your business in Pakistan, you now have all the knowledge to do it. All you need to do is think of an implementable business idea to start it without wasting time.