We refer to the Global University of Islamic Finance’s (Inceif) accusation that CAP’s claim that Islamic personal loans offered by banks are a rip-off is baseless. On Dec 16, 2013, CAP had made a press statement that a loan with an effective profit rate of 42 percent was a rip-off.

We regret that Inceif has itself made a baseless statement against CAP for it has not refuted any   of the statistics and facts raised in our press statement. Inceif’s accusation is based on its belief that Bank Negara would not have approved a loan with such a high rate of profit. But the undeniable fact is that the loan exists. We, too, were shocked when it was brought to our attention by a concerned citizen.

We are more than willing to provide Inceif with the name of this loan and the bank involved.  The bank’s own product disclosure sheet given to the borrower, also states that the effective profit rate of the loan is 36.8 percent (which is correct when the loan tenure is for five years). Does Inceif consider an effective rate of profit of 36.8 percent acceptable?

Not all Islamic personal financing charge such high effective rates of profit. What we have pointed out in our press statement is that such high rates are unacceptable whether for Islamic financing or for conventional loans. There is also a need to protect consumers who have placed unquestionable trust on loans labelled ‘Islamic’.

SM MOHAMED IDRIS is president, Consumers Association of Penang.