Four Banks Nigerians Can Use for Interest-Free Transactions as Islamic Finance Nears N5 Trillion

Nigeria has four fully licensed non-interest banks regulated by the Central Bank of Nigeria, according to the Non-Interest Financial Institutions Association of Nigeria (NIFIAN). The banks are Jaiz Bank, LOTUS Bank, TAJBank and The Alternative Bank.

The disclosure comes as the country's Islamic finance industry grows to about N5 trillion, covering banking, pensions, insurance and capital market investments.

How non-interest banking works

Non-interest banking does not involve charging or paying interest. Instead, transactions are structured around asset-backed financing, trade, investment and risk-sharing arrangements.

Jaiz Bank began operations in 2012 as Nigeria's first non-interest bank, serving individuals, businesses and government institutions. LOTUS Bank received its banking licence in 2021 and offers ethical banking services to personal and business customers.

TAJBank obtained its CBN licence in 2019 and commenced operations in December of the same year, providing services through digital and physical channels. The Alternative Bank operated as a non-interest banking window within Sterling Bank from 2014 before receiving a standalone licence in 2023.

Sukuk demand signals investor appetite

Abdullahi Idris Umar, managing director of One17 Capital Limited, said the industry's value had reached about N5 trillion. Speaking on Trust TV's Business Daily, he cited the Federal Government's Sukuk programme as evidence of rising demand for non-interest investment products.

An initial N300 billion Sukuk offer attracted subscriptions worth N2.2 trillion, significantly exceeding the amount available. The government has conducted seven Sukuk issuances, raising more than N1 trillion for infrastructure development, with the programme funding 124 road projects across the country.

Umar said the government could extend Sukuk financing to education, healthcare, potable water supply and environmental services. He added that independent annual audits provided an extra layer of accountability by checking whether funds had been deployed for their intended projects.

Pensions, funds and mortgages

Non-interest products are also gaining ground outside banking. Umar disclosed that Fund VI, a non-interest pension fund, grew from about N7 billion in 2021 to N54 billion in 2024. The capital market has close to 25 non-interest mutual funds, offering investors access to equity and fixed-income investments.

On small business financing, he cited partnerships involving Jaiz Bank, the Small and Medium Enterprises Development Agency of Nigeria and the Bank of Industry as efforts to improve access to capital through risk-sharing arrangements.

He also disclosed that the Bank of Industry had received CBN approval to establish a non-interest financing window, while the Federal Mortgage Bank of Nigeria had introduced non-interest mortgage products, recently launched in Kano.

For Nigerian businesses and savers, the growth of non-interest channels widens the options available outside conventional lending, where interest costs remain a major burden for small firms.