Promoters of Shariah-Compliant loans and mortgages often misleadingly refer to their products as “interest-free.”
This label implies that the lenders do not charge for their loans. This is of course not the case. As we have reported here on SFW several times, Shariah-compliant loans may not charge interest, but they are by no means free.
In fact they tend to be more expensive than conventional loans and are the product of a convoluted construction of fees and costs which usually add up to as much or more than the interest costs associated with conventional loans.
Now, an official in Malaysia has publicly declared that the profit margins on Shariah-compliant loans make them virtually indiscernible from conventional loans…