New Senate Bill Bans Interest on Private Loans

The Senate’s Standing Committee on Interior has approved a Bill seeking prohibition of interest on private loans in the Islamabad Capital Territory.

A meeting of the Senate Standing Committee on Interior was held at Old PIPS Hall, Parliament Lodges in Islamabad.

The committee discussed “The Islamabad Capital Territory Prohibition of Interests on Private Loans, 2017’ introduced by the Senator Sirajul Haq.

The committee after threadbare discussion approved the Bill which will now be sent to the Senate for approval.

In its previous meeting, the committee referred the Bill to Ministry of Finance, Ministry of Law and Justice and Council of Islamic Ideology (CII) for scrutiny as the Bill relates to financial matters with references to the injunctions of Islam.


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Ministry of Law and Justice, Council of Islamic Ideology and Islamabad Capital Territory Administration submitted reports to the committee on the bill. However, the Finance Ministry has not yet submitted a report on the draft law.

The Bill has sought a complete ban on interest-based lending by individual and group of people.

Clause three of the Bill states: “No money lander either individually or in a group of persons shall lend money for any purpose or advance loan to any person for the purpose of receiving interest thereon nor shall carry on an interest-based transaction in the Islamabad Capital Territory.

Whoever contravenes the provision of the sub-section (i) shall be punished with imprisonment of either description which may extend to 10 years but shall not be less than three years and shall also be liable to fine not exceeding one million rupees.”

The Bill seeks the same punishment for those intentionally and willfully abet, engages, assist or aid the money lender in lending money in contravention of the sub-section of Section 3.

The draft law seeks five years terms and a fine of up to five hundred thousands rupees for those who molest any borrower or debtor to pay back any loan or debt, any part or interests on such loans.

As per the Bill,  once it comes into force, every obligation of any debtor or borrower to pay interest on debts or such part of interest shall stand extinguished. The offence under the proposed law will be cognizable, non-compoundable and non-bailable and will be tried in the court of no less than a judicial magistrate of the first class.

If it is proved that the money lender committed an offence under this Act, the court will order that the interest already paid to the money lender is considered as payments towards the principal amount.  If the amount of interest paid by a borrower exceeds the principal amount, the court shall order the money lender to return such excess amount to the borrower.


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The statement of objects and reasons of the Bill states: The injunctions of Islam laid down in the Holy Quran and Sunnah have explicitly and unequivocally prohibited charging interest on loans and have declared war against those who do not abandon interest.

The Constitution obliges the State to take steps to enable the Muslims of Pakistan, individually and collectively, to order their lives in accordance with the fundamental principles and basic concepts of Islam and to provide facilities whereby they may be enabled to understand the meaning of life according to the Holy Quran and Sunnah.

It is expedient to make a comprehensive legislation on the subject for covering all the aspects of the mischief of private money lending and matters akin thereto.

Interest-based loans have badly affected the already poor economic condition of people of Pakistan. Due to the private loan transactions, people are harassed by the lenders who unable to pay even the principal amount.

Lender continuously harass to recover the amount with multiplied interest amount.”


  • Ishaq Dollar

    Why just apply it on private lending? What about institutional lending through banks? Are the issues with interest based lending magically not applicable on banks and institutional lending?

    What a sham. This is just legalizing interest based loans from certain avenues which are controllable and tied with KIBOR (bhatta of State Bank of Pakistan) and punishing those who are not in their control; i.e. those who do not pay KIBOR bhatta to State Bank of Pakistan.

  • SBP / Banks Giving Us Loan With Services Charges (Without Interest) Up to 10 To 20 Years With Simple Process.