When pricing their products, Islamic banks will have to consider various factors, viz. rate-ceilings imposed by the Central Bank; cost of funding; operating costs; volume of transactions and competitive conditions in the banking industry.
Rate-ceilings imposed by the Central Bank apply to both conventional and Islamic Banks, hence this factor cannot influence the pricing of Islamic bank’s loan favourably or unfavorably. Cost of funding for an Islamic bank is likely to be higher than a conventional bank which may have been in existence for a longer period, has a network of branches and a large customer base………………………………………..Full Article: Source