The Journal of Economic Studies and Policies

The Journal of Economic Studies and Policies

The mechanism of profit rate formation in Iranian Banking System

Document Type : Original Article

Authors
Hossein Eyvazlou 1
Morteza Baky Haskuee 2
1 Head of Department of Political economy group, Imam Sadiq (a.s) University
2 Head of office of Economic Modelling, Imam Sadiq (a.s) University
10.22096/esp.2021.129920.1368
Abstract
The goal of this research is to design mechanism of profit rate formation in Iranian banking system such that guarantees allocation efficiency. To this aim, it analyzes pricing mechanism from point of Islamic Scholars using an Islamic jurisprudential method of research. The results show that in a normal condition, setting the prices including banks profit rates, is forbidden and is in contrast to the Sharia Principles. Accordingly, this research proposes mechanism of profit rate formation based on truth and justice and an asset-based interbank money market. In this framework, central bank sets corridor of rates and banks finance firms by issuing commercial papers. Papers rates set based on return in real sector of economy and profit rate in banking system set by transaction of papers in the market.
Keywords
Real return
profit rate formation
an asset-based interbank money market
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The Journal of Economic Studies and Policies
Volume 7, Issue 2 - Serial Number 14
Issue 14
January 2021
Pages 165-186