The Senate Standing Committee on Finance, led by Senator Salim Mandviwala, has voiced grave concerns about the practices of Islamic banks, alleging that these institutions are misleading the public under the guise of ‘Islamic banking.’
During a recent meeting, Chairman Mandviwala disclosed that despite their claims of being interest-free, Islamic banks are imposing significantly higher rates on borrowers. He revealed that these banks charge interest rates between 25 and 30 percent, well above the 20 percent rate typical of conventional banks.
Mandviwala criticized this practice as a deceptive tactic, stating, “The people are being misled under the pretenses of Islamic banking.”
He also noted that the State Bank of Pakistan (SBP) seems to lack effective control over these institutions, allowing them to operate with insufficient oversight.
“Islamic banks are functioning with minimal regulation, and those who can exploit the system are doing so without restraint,” he added.
The Chairman further mentioned that he has received numerous public complaints about the exorbitant interest rates charged by Islamic banks. In light of these issues, the Standing Committee has requested a comprehensive briefing from the State Bank of Pakistan regarding the operations and regulation of Islamic banking.
The committee’s findings have sparked a call for enhanced transparency and stricter regulations within the Islamic banking sector to prevent potential consumer exploitation.
