Islamic Halaal Banking: What Is It? How To Be Qualified & Obtain Islamic Bank Loan & Finance In Nigeria Without Interest

Islamic financing is still relatively new to Nigerian banking, although it is expanding quickly. The actual Islamic banking practices are becoming more and more relevant in our modern Nigerian banking sector as a result of the establishment of new Nigerian Islamic Banks like Jaiz, Taj Bank, and Lotus.

What is Halaal or Islamic finance? It is only carrying out banking, lending, and borrowing by the fundamental Islamic teachings, which forbid charging interest on loans and making money off of borrowers.

Since then, the founders of Islam have established some guidelines and norms for borrowing, saving, and lending. Ironically, the mainstay of traditional banking is one of those prohibited activities—charging interest on loans. Islamic banking, on the other hand, promotes developing a sharing formula for the sales made using the loan.

The improper actions, no matter how commonplace, are referred to be haram in Islamic banking rules. Usury, one of the harams, is known for charging exorbitant interest rates on loans, and “Riba” approximately translates to the unjust growth that lenders obtain from the labor of their borrowers. According to Islamic beliefs, a lender should only gain from the success and prosperity of their borrower; they should not suffer as a result of the loan.

I will discuss the many kinds of Islamic loan products in this article. Why Islamic banking? How to find out whether you’re eligible for an Islamic bank loan in Nigeria and what steps you need to do to apply for an Islamic loan.

Several factors might influence your decision to use Islamic banking. The most extraordinary incentive to pick an Islamic Bank is the distinct sense of real care for the expansion of the business you are financing for.

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Here are some other factors:

• You are entitled to pay NO interest.
• the sharing of risks
• promotes Islamic principles, such as Alcohol, gambling, prostitution, and other vices that are not tolerated in halaal banking.
• enables business expansion

Islamic Loan Types

Murabaha (Cost-plus financing)

In this kind of loan, the Islamic Bank (lender) merely purchases an asset or resource from a third party that has been specified by their borrower and then leases the resource to the borrower at the original cost plus a substantial profit margin.

Ijara (Lease finance)

In this loan agreement, the lender (Islamic Bank) covers the cost of whatever asset the borrower desires to buy, including appliances, machinery, plants, vehicles, and other resources.

Next, the lender and borrower agree on a profit-sharing arrangement that benefits both parties.

Wakala (Agency Contract)

In this scenario, the wakeel (agent) is designated by the muwakkil (the principal/contract employer) to carry out a certain contract on their behalf. The contract’s earnings are then split equally between the parties.

The preservation of the interests of all parties concerned is the fundamental goal of this arrangement. Consider a Letter of Credit.

Determining your eligibility for financing from an Islamic bank

You have already taken the first step toward being eligible for financing from them if you now bank with one of the relatively few Islamic banks in Nigeria. However, the following list of fundamental requirements must be met for your loan application to be approved:

• Your company must advocate for Halaal, not Haram.
• Your reason for requesting funding must be legitimately lucrative.
• According to the current legal framework, your company is registered.

How to obtain financing or a loan in Nigeria from an Islamic bank

The most thorough due diligence is carried out by Islamic banks when profiling the businesses they work with.

This makes sense given that many businesses today pretentiously strive to fit their business strategies within Islamic principles just for the benefits. This is how the banks “sieve” the shaft out.

However, to start the funding request, you fundamentally need:

• Your business’s bio
• A letter of request
• Evidence of completed earlier tasks (if required)
• Cash flow forecasts (12 months)