Bill passed to ban private lending money

The government has imposed a ban on the interest rate on lending money between private parties with imprisonment and a fine of up to one million rupees.

In this regard, the National Assembly of Pakistan has passed a Bill, to prohibit the business and practices of private, money-lending, and advancing loans.

According to a bill, no lender shall lend money or advance loan to any person for the purpose of receiving interest, nor shall carry on an interest-based transaction.

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The government will be able to punish those parties involving in this crime. The person will face imprisonment for a term which may extend to five years but shall not be less than three years and shall also be liable to a fine not exceeding one million rupees.

In Pakistan, majority of private businesses depend on lending money to the individuals and parties against interest rates. This is a parallel informal banking business that is most popular in the country.

What is private lending?

This is informal channel of banking in which individuals and NGOs involve. They lend money to the private people and charge interest rates. They are no specific private lending companies in Pakistan involved in this business.

The private individuals mainly involve in this business. They lend money and charge interest rates from the people which are much higher compared to the one, banks charge.

Why people receiving lending from private parties? Banks are often reluctant to lend money to individuals like farmers. Moreover, the employees of the banks are receive bribe and therefore, this business has flourished.

In agriculture sector especially in Punjab and Sindh provinces, this business is very common. The farmers pay interest on lending on account of dealing with the middlemen who provide fertilizers, seed and even oil.

In this way, the farmers lose lot of money due to lending by private parties. When the harvesting commences, the farmers seek private lending which is an easy way to get money from the private parties and individuals.

However, this bill has placed a bar on such lending money by private parties and individuals. It has also introduced imprisonment and fines to stop such practices in future.