Baitulmaal Bank: Interest free loan for the needy to protect them from clutches of private money-lenders
Shams Ur Rehman Alavi
AURANGABAD: It is a financial institution that has shown a way to the society, as it provides loan but takes no interest.
Al Khair Baitulmaal, a cooperative bank, provides loan to the needy but doesn't charge interest from the borrower. Sensing how high interest rate causes suffering to people, the society decided that it would provide loan in such a way that the needy didn't get overburdened.
A large number of people go to private money lenders or financial institutions that provide money at a high rate of interest. However, in sharp contrast, the Al Khair Baitulmaal Urban Cooperative Credit Society doesn't charge anything except taking Rs 1,750 as office fee from the borrower.
Rather than interest, the Al Khair, wants a security in lieu of the money. For example, the borrower can deposit around 1 tola gold as a guarantee and get a loan of Rs 40,000. Once they are able to return the money, they can take the security, back, and have to pay nothing extra.
Otherwise, the borrowers get caught in this cycle and end up paying a huge amount and despite their best efforts, are unable to come out of the clutches of the money-lenders, because of the excessively high interest rates. Sometimes they end up paying many times more than the original amount.
Till now, the Al Khair Baitulmaal has given a loan of 220 million or around Rs 22 crore to 5,000 persons. In fact, micro-finance and providing loan to people who need it for urgent needs, supporting a small business, medical expenses or educational fee, such system can help the society in a big way.
As, it is a sin to take interest in Islam, the Al Khair Baitulmaal had decided that it would provide such loans. In Islam, it is a sin to take interest. The aim was that we must lend money to people who need it, and let them return it, without any interest. People are happy because they don't have to pay extra amount. It also saves women from fraud and exploitation from local financial groups.