Ethical Analysis of Late Payment Penalties

Recognizing the causes of non-current receivables can well prevent the largest deviation in the allocation of resources as the blocking of resources in a particular sector and their lack of proper distribution. Inserting the condition of late payment penalty is one of the legal solutions to deal with late payment, which is included in banking contracts. In this article, the status of the late penalty condition was examined in terms of its compliance with the standards of Islamic ethics and law, as well as in terms of achieving economic goals of accelerating the process of money circulation in the country's banking system.

The condition of late payment that is included in banking contracts from the perspective of experts in the field of ethics and Islamic law is immoral, illegitimate and is undoubtedly an example of usury. In addition to being unethical, this condition has been ineffective in terms of accelerating money circulation and has led to the growth of bank arrears. Therefore, solutions such as the need to protect the value of the national currency, serious supervision of the Central Bank, granting targeted facilities and inserting the condition of power of attorney from the account have been proposed, which in addition to complying with Islamic norms, can be effective in clarifying cash flow and reducing bank arrears.