| Summary: | Islamic banking in Malaysia have been experiencing late payment and default issues because customers are not allowed
to be charged with interest (riba) as opposed to the practices in the conventional banking. To mitigate these issues, the
Shariah Advisory Council of Bank Negara Malaysia has enforced ta’widh and gharamah as regulatory alternatives.
Practically, ta’widh and gharamah were imposed on the defaulting customers who fail to meet their obligation to pay
their financing based on several conditions. Given the significance of its imposition, this paper aims to analyse the current
practice in Islamic banks and examine the views of contemporary Muslim scholars on ta’widh and gharamah and its
suitability as alternatives for avoidance of riba.
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