In Iran, The Government has initiated a movement toward liberal banking sector since 2001. However, the progress has been rather slow. Bank Markazi (the central bank) authorised the initiation of private credit institutions in 1994, and authorised foreign banks (many of them had already founded representative offices in Tehran), in 1998 to introduce full banking services in free-trade zones, in Iran.
The Central Bank was forced to establish an Islamic banking law after the Islamic Revolution. The Islamic Banking law of Iran was passed by the Majlis in 1983. According to this law, Iranian banks can only engage in interest-free Islamic dealings, since interest is accepted as usury or riba and is prohibited by Islam and the holy book of the Qur’an. These are commercial dealings that include exchange of goods and services in return for a share of the appropriated ”profit”.
Iran has been using interest rates, which are officially termed “provisional”, as rates paid to depositors or taken from borrowers ought to demonstrate the profits or losses of a trade. According to these rules; deposit rates, called as “dividends”, are theoretically associated with a bank’s lucrativeness. In fact, however, these dividends have become fixed rates of return—depositors have never lost their savings. Because, losses made by the banks and practically never taken returns more than the provisional former profit rates. Interest charged on lendings is presented as “fees” or a share of enterprise profits.
All dealings like that are acted by means of Islamic contracts, such as Mozarebe, Foroush Aghsati, Joale, Salaf, and Gharzol-hassane. Details of these contracts and related practices are determined in the Iranian Interest-Free banking law and its guidelines. This law describes and authorizes an Iranian Shiite form of Islamic commercial laws. Iranian banking system binds to Islamic rules that forbid gaining or giving interest.
Shariah-compliant resources have reached at $400 billion worldwide, according to Standard and Poor’s Ratings Services, and the potential about market is $4 trillion. Iran,Saudi Arabia and Malaysia are at the top with the biggest sharia-compliant resources.