Foreign financing (finance) in Iran: jurisprudential pathology and alternative Islamic solutions

Articles in Press

Authors

1 Department of Economics and Islamic Banking, Faculty of Economics, Kharazmi University

2 Shariah supervision officer and member of Industry & Mine Bank's implementation committee

10.30471/iee.2025.10375.2442

Abstract

Finance is a common method of foreign financing in Iran. In this method, the foreign bank, upon the request and approval of the applicant, deposits the principal of the foreign currency loan into the account of the foreign company providing goods and services. The repayment of the finance is guaranteed by the insurance company. Of course, the applicant, based on an agreement with the domestic bank, deposits the installments on a specific due date into the account of the domestic agent bank, and the domestic agent bank is responsible for paying the applicant's interest and installments on the foreign currency loan to the foreign bank.

In the first part, this article deals with the subject of this financing method in a library manner, and in the second part, it deals with the jurisprudential analysis and presentation of its alternative. On this basis, it is proven that the current approach to finance, based on international banking practice, is a kind of loan with interest and usury. Therefore, receiving any commission by domestic banks is null and void and prohibited. Finally, considering the history of Islamic financing among international financial institutions and the existence of Islamic windows in the international banking industry, three methods of attorney-based murabaha, attorney-based ji'ala, and debt discounting are proposed to replace the common method. Of course, due to the service-specific nature of the ji'ala method and the lack of generality of debt purchase, the attorney-based murabaha method is preferred.

Keywords

Journal of Economic Essays: an Islamic Approach

Articles in Press, Accepted Manuscript
Available Online from 17 May 2025

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