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Pakistan is a country which has faced a number of natural disasters in recent past including floods, earth quakes and then the consequences for being front line state in recent so called "war on terror". Huge population is living below and around poverty line especially in rural areas. These disasters, poverty and other issues have affected millions of people across the country. A number of national and international development and relief agencies remained involved in different activities regarding development and rehabilitation for the underdeveloped communities. These agencies have introduced and launched different projects to enable poor people to earn their livelihood and in those projects microfinance was a major component. Impact of these microfinance projects in restoring the livelihood and living standard of those communities has been criticized due to element of "interest" i.e. Riba which is strictly prohibited in Islam. On the other hand, relief agencies and development organizations claim that it is necessary for them to increase their interest-based resources so that they may be able to provide their services for sustainable development.