Islamic banking in Iran

the following is research proposed for a conference in Iran in March 2017

Due to its geographic isolation species seen nowhere else have survived or evolved into existence in the Galapagos Islands. Similarly over the last three of four decades Iran’s banking system has, by dint of geo-strategic and political factors and trade and economic sanctions, developed in isolation. Since the 1983 Law for Usury (Interest)-Free Banking Operations (‘the 1983 Act’), banks operating in Iran together with the national monetary and payments/credit system are obliged to comply with Islamic law [1983 Act article 1(1)]. Assuming universal compliance implies Islamic banking assets in Iran exceed US$482 billion: more than the banking assets of Saudi Arabia, the UAE and Malaysia combined (2014 data, Bloomberg 6 April 2015).

This research sets out to achieve five objectives: 1) survey existing research on the banking sector in Iran from 1983 to the present (Khan and Mirakhor 1990; Shahdani 2007; Guillaume and Sensenbrenner 2011; World Bank 2011; Islamic Development Bank 2014; Grassa 2015); 2) explicate and critically assess the 1983 Act (having particular regard for articles 3-7); 3) ascertain the products and practices that have come to dominate and populate the banking landscape in Iran; 4) compare (2) and (3) with the banking laws and practice of Islamic financial institutions in the Arab Gulf; and 5) venture some predictions on the future of banking in Iran based on existing trends and the gradually increasing access gained by international investors, banks and other companies.

This inquiry will claim that the Islamic Republic resembles a laboratory for an experiment in Islamic financial services, and that Iran is a unique jurisdiction even compared with others long purporting a wholly Islamic banking systems (Pakistan and Sudan) and those with dual banking systems (the GCC States, Malaysia) in which governments license Islamic banks (and/or windows).


Comments are closed.
%d bloggers like this: