Is it permissible for an Islamic bank to impose penalty for late payment? | ahli islamic

 

Is it permissible for an Islamic bank to impose penalty for late payment?

If Islamic banks do not impose any penalties on late payment the customers shall not pay in time and thus the Islamic banks will not be able to run their business efficiently and give a good return to the investors.  Therefore, the Islamic banks have decided to take from each client an irrevocable undertaking that in case of late payment he shall be charged a penalty which shall be donated to a charity supervised by the Sharia Supervisory Board of the bank independently from the bank. The Islamic banks do not use these donations for their own benefit, but incorporate such provisions in their contracts to check potential default.