An Analysis of Late Payment Charge On Defaulters in Islamic Banking and Finance: A Malaysian Perspective
Under conventional banking, a debtor who defaults in instalment payment or pays later than the agreed time, will have to pay a charge of interest. However, in Islamic banking and finance, such interest is clearly caught by the prohibition of riba. As an alternative to the charge of interest, Isla...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
2014
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| Subjects: | |
| Online Access: | http://eprints.unisza.edu.my/4820/1/FH02-FLAIR-15-02995.pdf http://eprints.unisza.edu.my/4820/ |
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| Institution: | Universiti Sultan Zainal Abidin |
| Language: | English |
| Summary: | Under conventional banking, a debtor who defaults in instalment payment
or pays later than the agreed time, will have to pay a charge of interest.
However, in Islamic banking and finance, such interest is clearly caught by
the prohibition of riba. As an alternative to the charge of interest, Islamic
financial institutions impose late payment charge on defaults by its customers.
This paper analyses the Malaysian experience in imposing late payment charge
for defaults arising out of Islamic banking and finance instruments under
the present statutory framework. Basis for allowing late payment charge and
types of defaulters were also examined. At the end, this paper suggested some
suggestions to ensure the administration of late payment charge is more
Shari‘ah compliant. |
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