Should the Kedah Education Financing (PPNK) conventional education loan scheme be converted to a Shariah-compliant scheme, and how should charges and late penalties be handled?

Summary

The Kedah State Fatwa Committee fully supports PPNK's proposal to convert its conventional education loan scheme into a Shariah-compliant one. Only actual administrative costs are permitted, in line with the National Fatwa Committee's decision on ju'alah-based PTPTN financing, and other charges are subject to muamalat principles. The current 4% late penalty is considered burdensome and should be reviewed to no more than 2%, based on compensation for actual loss and service fees. Non-Muslim borrowers are advised to be given a choice between the Shariah-compliant and the conventional scheme.

Written in our own words from the original fatwa — check the source before acting on it.