The country’s Islamic banks have refused to follow the central bank’s instructions regarding collection of utility bills after their due date, stating that Sharia-compliant banks consider it as “Riba”. Al-Riba is the Arabic word used for the English word “interest” that, in Islamic terminology, means effortless profit or that profit which comes free from compensation or an extra earning obtained that is free of exchange.
Some Islamic scholars have defined “Riba” as a loan with the condition that the borrower would return to the lender, more than and better than the quantity that was originally borrowed. A circular released by the State Bank of Pakistan (SBP) revealed that some of Islamic Banking Institutions (IBIs) were not accepting payment of utility bills from depositors after the due date, deeming the bills as un-Islamic.
“It has been observed that some Islamic Banking Institutions (IBIs) refuse to accept payment of bills after the due date as the late payment includes a penalty which in their opinion is Riba and thus cannot be collected by them,” said SBP IBD Circular Letter No. 01. This situation forced the State Bank to bring about a “fatwa”, religious decree, from the Sharia advisory board of its own as well as that of the Islamic banks to persuade the latter.
“The matter was discussed with the Shariah Advisors of all IBIs at the Shariah Advisors’ Forum as well as the SBP Shariah Board,” the circular said.
According to the central bank, the Sharia boards, comprising Muslim religious scholars, had consented to collection of utility bills and the controversial surcharge “with displeasure” in the broader interest of the common people.
“The Shariah scholars opined that keeping in view the larger public interest and convenience, the IBIs can collect utility bills after the due date with displeasure,” the regulator told the presidents and chief executive officers at the Islamic banks.
After receiving the fatwa, the central bank has asked the Islamic banks, through issuing the above circular, to comply with the regulator’s prevalent instructions on collection of utility bills. “IBIs are advised to strictly comply with SBP’s prevalent instructions on collection of utility bills within and after the due date at their branches,” the circular said. Keeping names of the concerned Islamic banks in concealment perhaps as a policy matter, the SBP Chief Spokesman Syed Wasimuddin said the banks would have to obey the SBP’s instructions. “We have issued the circular that requires the banks to comply,” the spokesperson told Pakistan Today.
The SBP’s BPRD Circular No. 3 of 2006, read with BPRD Circular No 38 of 1997, require all branches of the scheduled commercial banks, including Islamic ones, to collect utility bills from their customers. The aforementioned instructions to facilitate the payment of utility bills are in line with the suo-moto order No. 4 of 2006 issued by the Supreme Court of Pakistan.
PTCL, SSGC and KESC all have late payment surcharge. Why should it be necessary to pay any of these utilities on time? Consumers are being punished for not paying on time – by standards it is illegal and unjust. Late payment surcharge is illegal money – because nothing extra is being provided. KESC in particular has no right to have a late payment surcharge – it does not provide electricity round the clock as it should and does not provide the required voltage. The KESC should be compensate all its customers for the hours of black-outs (alias load-shedding) and endless low voltage and voltage fluctuation. The bills should be half till everything is done to normal.
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