The practice of imposing default rate in Islamic home financing product in Malaysia: Analysis from regulatory and Shariah perspective

In developing and structuring an Islamic banking product, one of the areas that should be addressed is to mitigate risk includes default risk. Financial institutions will always exposed by customers. This faced banks as well when granting financing facilities customers irrespective underlying Shariah contracts apply product structure. order such risk, bank normally impose late payment charges if instalment amount not received due date. addition normal charges, may also rate on who have defaulted within certain period. As such, this study analysed practice charging in home involving sale- lease-based contracts. qualitative adopted explanatory methodology main method data collection from relevant documents, Shariah-related regulatory policies, resolution issued Bank Negara Malaysia (BNM), decided court cases, documentation related rate. Next, secondary journal articles other published sources, including literature study, were deployed analyse said issue. Evidently, several seem their Such consistent with spirit finance purpose gain more income while face financial issues. prescribes scholars regulator re-evaluate current policies structure ensure they embrace Shariah, apart protecting consumers heightened burden.