No Indian bank or NBFC offers an interest-free business loan, and the Mudra and PMEGP schemes every small trader is pointed to are interest loans with a subsidy or guarantee attached. The only interest-free business finance in India comes from member co-operatives: Al-Khair in Bihar, Jharkhand, Uttar Pradesh and Delhi, whose website prints a one-time service charge of 8 percent for a three-month loan and 16 to 18 percent for eight to twelve months; Janseva in Mumbai, whose self-help group model lends twice a group's savings after twelve months; and Bait-Un-Nas'r in Mumbai and Thane, whose micro finance is quoted on application. This page compares the three as they publish themselves. The business financing hub lists the products by state.
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Al-Khair's two business loans, exactly as published
Al-Khair Co-operative Credit Society, registered as a multi-state society under number MSCS/CR/136/2002 and headquartered in Phulwari Sharif, Patna, is the one society in this comparison that prints its charges. Its Short Term Business Loan page describes a loan tenure of three months, 'based on fixed service charge + GST basis, not interest-based', fixed at 8 percent of the loan amount as a one-time charge, and aimed at shopkeepers and small business owners. Its Mid Term Business Loan page describes a tenure of eight to twelve months for business expansion, with the one-time charge 'fixed between 16% to 18% of the loan amount depending on loan amount and duration'.
Eligibility is identical for both: you must be a registered member, your daily deposit or Amanat account must be at least three months old and actively operated, your daily deposits must be regular, and your account balance must be 10 percent of the requested loan. The application process adds a Rs 20 form fee, a requirement to hold shares worth 10 percent of the loan amount, one member guarantor plus one family guarantor below Rs 1 lakh and two member guarantors plus one family guarantor at Rs 1 lakh and above, one item of security (a bank cheque, gold, an original property document or an original vehicle document), a written description of the business, ID and address proof for borrower and guarantors, and photographs. Loans are credited to the member's Amanat account and may be paid by account payee cheque, NEFT, RTGS or cash as approved.
Two things the site says that matter for a trader. The homepage carries a Hindi warning that the society does not give loans online and that any phone call offering one is a fraud, so there is no 'apply online' route and anyone promising one is not Al-Khair. And the branches page lists 13 branches plus the head office: Phulwari Sharif, Patna Central, Patna City and Neora in and around Patna, plus Ara, Gaya, Motihari and Sasaram in Bihar, Dhatkidih and Maango in Jamshedpur, Gomti Nagar and Nakkhas in Lucknow, and Jamia Nagar in New Delhi. If you are not near one of those, Al-Khair is not your lender. Our full Al-Khair guide covers the deposit side.
Janseva's SHG microfinance and business loan
Janseva Co-operative Credit Society, registered in March 2010 under the Multi-State Co-operative Societies Act and run from Colaba in Mumbai, does not publish a per-loan service charge for individual business borrowers. What it publishes in detail is a self-help group model. Under the fee-based model on janseva.in, each SHG member saves Rs 5 a day for at least 25 days a month; of the Rs 1,875 a group deposits monthly, Rs 1,500 is savings and Rs 375 is deducted as membership fees. After one year of savings and internal loan repayments, the SHG becomes eligible for an interest-free loan of twice its savings, on joint liability with no collateral, paying a processing fee of 1 percent of the loan and contributing 4 percent of the loan to the group's own reserve fund.
The business loan proper comes later. After two years of savings and repayments, the SHG becomes eligible for an 'interest free business loan' of twice or more its savings, again on joint liability with no collateral and a 4 percent reserve contribution, and Janseva's profit-based model then runs the business in partnership with the group, splitting profit 70 percent to members and 30 percent to Janseva to cover expenses and build reserves. Repayment can be daily, weekly or monthly. For traders who are not in an SHG, the social banking page lists 'business participatory loans' second in its loan priority order and names murabaha, mudarabah, musharakah, diminishing musharakah, ijarah and istisna as debt financing modes, all 'on decided terms and conditions or as decided by the Board', which is to say quote-only.
Janseva's one published trade product for groups of traders is the Mutual Help Fund Deposit account: five to twenty members in trade, commerce or industry contribute equal monthly sums, one member takes an interest-free loan each month equal to the group's deposit, and as an alternative the group may take an overdraft against trade bills of Rs 1 to 5 lakh, guaranteed by the group, with a scheme fee 'equivalent to half/one percent of the loan amount/overdraft'. Membership itself costs 10 shares of Rs 100 each plus a processing contribution of 1 percent of the share amount or Rs 100, whichever is more, and a Rs 10 admission fee, and loan applicants must hold shares worth 2.5 percent of a secured loan or 5 percent of an unsecured one. Our separate Janseva guide sets out the deposit accounts.
Bait-Un-Nas'r's micro finance and surety loans
Bait-Un-Nas'r Urban Co-operative Credit Society, established on 1 October 1976 under the Maharashtra Co-operative Societies Act with registration BOM/RSR/786 of 1976, lists its loans on bait-un-nasr.org as gold loan, vehicle loan, property mortgage loan, surety loan and 'unsecured micro finance', the last described as small business support with no collateral and weekly or monthly repayment. The document checklist is identity proof, address proof, income proof for business, and passport photographs. The site's repayment calculator asks for a 'service charge rate (% annual)', which tells you the charge is expressed as an annual percentage, but the rate itself is not printed anywhere we could find. It is quote-only, and you get the quote at a branch.
The branch page lists nine offices: Mahim (the head office), Bandra West, Dharavi, Morland Road in Madanpura, Memonwada, Jogeshwari West, Jogeshwari East, Mira Road and Mumbra. All are in Greater Mumbai and Thane, which matches the society's stated area of operation. For a trader in Dharavi or Madanpura this is the nearest interest-free counter in the country; for anyone outside Mumbai it is irrelevant.
The three societies side by side
| Item | Al-Khair | Janseva (SHG model) | Bait-Un-Nas'r |
|---|---|---|---|
| Business product | Short Term (3 months) and Mid Term (8 to 12 months) Business Loan | SHG loan after 12 months; SHG business loan after 24 months | Unsecured micro finance; surety loan |
| Charge, as published | 8% one-time + GST (short); 16% to 18% one-time (mid) | 1% processing + 4% to group reserve; later 30% profit share | Annual % service charge, rate not published |
| Ticket size | Not published; guarantor rules change at Rs 1 lakh | Twice group savings; MHFD overdraft Rs 1 to 5 lakh | Not published |
| Membership and shares | Shares of Rs 10, minimum 10; shares worth 10% of loan | 10 shares of Rs 100 + 1% processing + Rs 10; shares 2.5% or 5% of loan | Membership required; terms at branch |
| Guarantors and security | 1 to 2 member guarantors + 1 family; one security item | Joint liability of SHG, no collateral | Surety loan uses a guarantor; micro finance no collateral |
| Waiting period | Account 3 months old with regular deposits | 12 months of savings (24 for business loan) | Not published |
| Cities | Patna, Ara, Gaya, Motihari, Sasaram, Jamshedpur, Lucknow, Delhi | Mumbai (Colaba, I.R. Road) | Mumbai and Thane, 9 branches |
| Online application | No, and the site warns of fraud calls | No | Site has 'Apply Now' buttons; branch visit still required |
How the service charge is quoted and how to annualise it
A one-time service charge looks cheaper than it is because it is not expressed per year. Al-Khair's figures are the clearest test. A Rs 1,00,000 short-term loan at 8 percent costs Rs 8,000 plus GST for three months; the same charge repeated four times a year is 32 percent, so the annualised simple cost is 32 percent before GST. A mid-term loan at 16 percent over eight months annualises to 24 percent, and at 18 percent over twelve months it is 18 percent. These are not interest, because the charge is fixed at disbursement and does not grow with delay, but they are the numbers to compare against the alternative. Our true-cost analysis does this across the sector, and the service-charge debate itself is unresolved among Indian scholars.
For Janseva's SHG model the arithmetic is different: 1 percent processing plus 4 percent to a reserve the group itself owns is a 5 percent outflow of which four-fifths comes back to members at closure. For Bait-Un-Nas'r, ask the branch for the annual service charge rate the calculator uses, the tenure, and whether GST is added, and write the three numbers down before you sign. A quote without all three is not a quote.
Why Mudra and PMEGP are interest loans, and the subsidy question
Pradhan Mantri Mudra Yojana loans are made by banks, NBFCs and microfinance institutions, and they charge interest at the lender's rate; Mudra is a refinance and guarantee framework, not a lender of interest-free money. PMEGP, the Prime Minister's Employment Generation Programme, works the same way with a margin money subsidy from the government layered on a bank term loan. The official mudra.org.in site returned server errors when we tried to fetch it on 18 September 2026, so we do not quote its loan ceilings here; the structure is not in doubt. A Muslim trader who takes a Mudra loan has taken an interest loan from a bank, and the subsidy does not change the contract.
The subsidy question that follows is whether a government grant attached to an interest loan can be accepted. The grant itself is not interest, and scholars who permit interest loans under necessity would permit the grant with the loan. Scholars who do not accept business expansion as a necessity would not permit the loan, and the grant falls with it. What no one permits is taking the loan for the subsidy and treating the interest as a cost of doing business, which is the common practice this page exists to question.
What a trader can structure without a lender
Most small business finance in India is not a loan at all; it is credit from suppliers and advances from customers. Both are permissible when structured as sales rather than money lent, and both are available to a trader with a reputation and no society nearby.
- Supplier credit on invoice: buy stock at an agreed price payable in 30 or 60 days, which is a deferred-payment sale (bai' muajjal) and is halal provided the price is fixed at contract and no late charge accrues.
- A murabaha-style purchase through a partner: a relative or investor buys the equipment and sells it to you at a disclosed markup payable in instalments, which is permissible when the partner takes ownership before selling.
- Customer advances: take a deposit against a confirmed order, which is a salam or istisna structure for goods you will manufacture or procure.
- Profit-sharing capital: a mudarabah where an investor provides capital and you provide work, sharing profit in an agreed ratio, with losses borne by the capital.
- Partner capital: a musharakah where both contribute money and labour, which Janseva's SHG business model applies at group level.
- Qard hasan from family or community, with a written repayment schedule and no charge of any kind, which our qard hasan explainer covers in detail.
Steps and documents to apply at a society
- Confirm the society operates where you live or trade; Al-Khair's and Bait-Un-Nas'r's branch lists are published, Janseva's eligible states are listed on its membership page.
- Become a member: buy the minimum shares, pay the admission fee and any processing contribution, and submit photo, Aadhaar and PAN copies.
- Open the deposit account the society requires and run it for the waiting period, which Al-Khair sets at three months of regular daily deposits.
- Build the share and deposit balance to the ratio demanded, 10 percent of the loan at Al-Khair, 2.5 or 5 percent at Janseva.
- Line up guarantors who are themselves members, plus a family guarantor at Al-Khair, and one acceptable security item.
- Prepare the business description, income proof, ID and address proof for yourself and each guarantor, and photographs.
- Get the service charge, tenure and GST treatment in writing before signing, and annualise the charge yourself.
Who should choose what
A shopkeeper in Patna, Gaya, Lucknow, Jamshedpur or Jamia Nagar with three months to prepare should use Al-Khair: the charges are printed, the process is listed step by step, and the short-term loan at 8 percent for three months is the most transparent interest-free business product in the country, provided you understand it annualises to 32 percent. A group of women traders in Mumbai should look at Janseva's SHG route, accepting the twelve-month savings period as the price of a no-collateral loan at twice their savings. A trader in Dharavi, Madanpura, Mumbra or Mira Road should walk into Bait-Un-Nas'r and ask for the annual service charge rate on unsecured micro finance, because that is the only way to learn it. Our membership-side comparison of the three covers deposits and safety.
Everyone else, which is most of India, has no society and should not pretend otherwise. Use supplier credit, customer advances and profit-sharing capital first; use Sahulat's affiliate directory to check whether a smaller society operates in your district; and if you are considering a Mudra loan, be honest that it is an interest loan and decide on necessity grounds rather than subsidy grounds. The get-matched tool will tell you which of the three, if any, covers your city. Facts checked against alkhairsociety.com, janseva.in, bait-un-nasr.org, sahulat.org on 18 September 2026.
Frequently asked questions
Is there any interest free business loan in India from a bank?
No. No Indian bank or NBFC offers an interest-free business loan, and the RBI has not licensed Islamic banking. Mudra and PMEGP loans are bank loans at interest with a guarantee or subsidy attached. The only interest-free business finance in India comes from member co-operatives such as Al-Khair, Janseva and Bait-Un-Nas'r, which charge a service fee rather than interest and lend only to members.
What does Al-Khair charge on a business loan?
Its website prints a one-time service charge of 8 percent plus GST on the three-month Short Term Business Loan and 16 to 18 percent on the eight to twelve-month Mid Term Business Loan, depending on amount and duration. Annualised, those are roughly 32 percent, 24 percent and 18 percent respectively. You must be a member with a three-month-old account, hold shares worth 10 percent of the loan, and provide guarantors and one security item.
How does Janseva's SHG microfinance work?
Members of a self-help group save Rs 5 a day; after one year of savings and internal repayments the group qualifies for an interest-free loan of twice its savings on joint liability with no collateral, paying 1 percent processing and 4 percent into its own reserve. After two years it qualifies for a business loan run in partnership with Janseva, with profit split 70 percent to members and 30 percent to the society.
Can I apply for an interest free business loan online?
Not at any of the three. Al-Khair's homepage warns in Hindi that the society does not give loans online and that any call offering one is fraud. Janseva requires membership, a deposit account and a branch application. Bait-Un-Nas'r's site has 'Apply Now' buttons, but membership, documents and the service charge quote are handled at its Mumbai branches. Treat any online 'Islamic business loan' offer as suspect.
Is a Mudra loan halal?
A Mudra loan is an interest loan from a bank, NBFC or microfinance institution; Mudra itself refinances and guarantees rather than lends. The government subsidy or guarantee does not change the contract. Scholars who permit interest borrowing only under necessity would need business expansion to meet that bar, which most do not accept. Taking the loan for the subsidy and treating interest as a cost is the practice to avoid.
Compare providers in your state
See side-by-side comparisons of Shariah-compliant products, or let our matcher recommend the best options for your situation.
What can a trader do with no society nearby?
Use supplier credit on fixed-price invoices, customer advances against confirmed orders, a murabaha-style purchase through an investor who buys and resells equipment at a disclosed markup, or profit-sharing capital under mudarabah or musharakah. Check Sahulat's affiliate list for a smaller society in your district. Qard hasan from family with a written schedule remains the cleanest option for small amounts.
