KARACHI – Islamic banks in Pakistan are under scrutiny for charging high interest rates, with some rates reaching up to 30% on loans. This is significantly higher than the 20% charged by conventional banks.
The Senate Standing Committee on Finance has expressed concerns about these rates. Chairman Senator Saleem Mandviwala accused Islamic banks of misleading customers by marketing their services as religiously motivated, despite the high costs.
The committee also discussed the Deposit Protection Corporation Amendment Bill 2024, which aims to improve consumer protection but does not currently include microfinance banks. The board will decide if these banks will be added to the protection scheme.
Mandviwala noted that many people choose Islamic banking for financial benefits rather than religious reasons and reported receiving numerous complaints about the high interest rates. The committee has requested a detailed briefing from the State Bank of Pakistan on Islamic banking practices and their alignment with international standards.
Currently, conventional banks hold the majority of the market share, with Islamic banks accounting for about 25%.