Non-Usury Banking Fits the Change Strategy:
The Solution to Revive the Economy
Bijan Bidabad
B.A., M.Sc., Ph.D., Post Doc.
Professor of
Economics and Chief Islamic Banking Advisor
Bank Melli Iran,
Tehran, Iran�������
Email:
[email protected]
Abstract
Based on
the working in different fields of sciences for a long time, a solution to
change the structure of banking products as a solution to economic crises is
proposed. By sharing the risks economically this solution can make economic
integrity among all economic sectors.In
this paper, we are going to introduce a new Islamic financial institution with
elaborated economic and financial characteristics. �Non-Usury Bank Corporation�
(NUBankCo) is defined in a way that depositors are the shareholders of the Bank.
This corporation is a new kind of shared ownership corporation, which its
shareholders are deposit holders and their deposits work as corporation�s
equities. The defined bank can perform non-usury operations, and by designing a behavioral model, it is shown that NUBankCo
can draw an environment that the welfare of society is to be maximized.
Mobility of deposit resources in NUBankCo is less than conventional banks, and
there are fewer conflicts between large and small shareholders/depositors and
limits the emergence of shareholders� cartels and thus huge sudden outflow of
funds which creates bankruptcy crises.
Keywords: Usury, Islamic Banking, Finance, Rastin Banking,
Profit and Loss Sharing
1. Introduction
The recent
economic recession was predictable for a few years before, even if its depth
cannot be imagined yet. A new solution matching the current turmoil was being
confectioned for several years to remedy this type of economic crises. In these
crises, the monetary policy would not be efficient enough, and fiscal policy is
not a fast recovery remedy. Thus, the protectionism policy should be attained
to solve the problem for the long run. Refection of the financial system is the
most important step to make.
The Profit
and Loss Sharing (PLS) banking is the method to replace actual usuric
traditional banking. PLS banking not only can regain the trust of investors and
depositors to the financial market, but also will reduce costs of investment
and production by reducing the risks of investment and producing stable
markets. In this paper, the other positive effects of PLS such as the creation
of new job opportunities, easy flow of capital and transactions, an increase of
investments and productivity resulting to Global Wealth and the attenuations of
international political complications also equity and peace, will not be
explained.
Today, the
global economy shows the lowest interest rate and the United States economy�s
recession is
being propagated to west and east of the world,
where the recent increase
of oil price caused the markup prices grew at the global
level, and the expensiveness has been prevailed in public sustenance,
especially for food grains. The bankruptcy and deficits of some western globe
banks and higher financial risks at international financial markets and
sequential crises in these markets illustrate a crisis similar to the 1929
world crisis. However, this one was accelerated by several impacts on the
economy, such as natural disasters in West and risk-increasing Bush's policies
in the East. Based on detailed economic researches, it has been proved that the
volatilities of financial sector cause the fluctuations of the real economy and
starts business
cycles. In the 1929 crisis, investment and saving
inconsistency in western economies, especially in the United States pushed the
global economy to the phenomenon of the liquidity trap. There were only
negative interest rates that were able to motivate the economy to pull it up
from the bottom of the cycle. The monetary policy did not work because the
interest rate was too low to be pushed to lower rates by increasing the money
supply. When the economy falls into the liquidity trap, there is no monetary
policies solution via either increasing the volume of liquidity or decreasing
the interest rate to motivate investment demand to recover the economy back to
prosperity. Principally, a liquidity trap is caused due to a weak relationship
between the rate of return in the real sector and the interest rate in the
monetary sector; when the interest rate moves to lower rates but nominal
investment rate of return does not. One reason for
such occurrence is the increase of investment risks, which decreases the net
return of capital. The risk becomes a wide premium of capital market's interest
rate and investment market's return rate. On the other hand, the difference in
the interest rate and investment rate of return increases.
The
president of the United States of America, Mr. Barak Hussein Obama's
"Change Strategy" is a worthy decision to be taken at this point in
time. This decision would change the world economy as well if it becomes
successful in changing the economic infrastructure of the United States. If his
policy ends to monetary sector reform, he will be able to revive the economy
from the deep crisis; because the business cycle happens because of increase of
risk in financial markets due to usury financial systems.
If the risk
and the profit of investment were shared with depositors, financial enterprises
would be confronted with the lowest risk, and the risk would be transferred to
depositors and debtors both, so the real and the financial sectors will be
immunized from volatility. The solution is to peg the interest rate to real
economy return rate. Whereas by sharing the risk and the profit, the distance
between the real sector and financial sector rates is reduced, and the premium
of the risk will diminish. This will enable investment with lower cost for
production. In fact, where the monetary solutions cannot be efficient (like the
current situation) by application of risk sharing, we can balance and revive
the economy. This is why theosophically divine religions pose: �Usury is
forbidden�.
A solution
to solve this deficiency has been expressed by religious legislators through
deletion of usury from the economy. The religious legislation in Torah and
Bible and Quran actually have removed the intermediate monetary market between
depositors and investors by the prohibition of usury and establishing a
proportional relationship between profit and loss of investors (debtors) and
the receipts of depositors. Thus, it is not an exaggeration to say that the
solution to prevent a global crisis similar to the previous century crisis is
to change the nature of usury in the monetary sector and establishing profit
and loss sharing between depositors and investors (entrepreneurs). Real sector
return rate is a stable rate, due to the stability of productivity and will not
fall down or rise up drastically. Establishment of profit and loss sharing will
stabilize the interest rate due to the strengthening of the link between the
interest rate in the money market and the rate of return of investment in the
real sector. Thus, inconsistency between investment and saving and, also, the
liquidity trap will not happen in the economy to push the economy to the
crisis. Although the business cycle will not vanish from the economy, the
cycles' swings will have narrow volatility domain.
Many
countries have taken important steps to establish profit and loss sharing (PLS)
banking systems. Regarding the lower risk of this type of banking, some western
countries have been interested in testing this non-usuric banking system for
the sake of risk averting. According to the IMF reports, Islamic banking has
increased 10-15% annual growth in the last decade, and the same growth is
predicted for the future years.
Despite the
interest of bankers for using Profit and Loss Sharing (PLS) banking for the
last decades, it has not prevailed yet executively. The existence of different
definitions of Riba, absence of appropriate operational, supervisory, and
managing mechanism on PLS are some reasons that haven't allowed this kind of
banking to be practical yet.
Here, we
are going to introduce a practical method for Profit and Loss Sharing (PLS)
banking to overcome these problems. In this bank, the basis of determination of
interest rate of loans is the real economy sector return. The bank operates as
an intermediate that gets commissions and collects saving resources and as an
attorney or legal representative of depositor allocate them to investment
projects and supervises the detailed operation of the contractor. The yields of
an investment will be transferred to resources owners who are depositors
whatever the profit or loss is.
2. Profit and Loss
Sharing based on Non-Usuric Banking Products
Despite
many developments and endeavors, PLS banking has not been settled down
operationally. The obstacles are due to needs to apply suitable executive
mechanism and operation's procedures. In the way of applying PLS, its
procedures all the times have been mixed with usuric banking and even its
financial instruments (innovations) as "profit and lost sharing
certificate" and "investment deposit certificate" which
attracted attention in the late 1990s were left aside. This contamination
occurred due to some reasons. The most important one was due to executive and
supervision problems on the operation of entrepreneurs who receive the
financial resources for PLS, in all financial, economics, technical and executive
aspects; because, the banks have not been organized to supervise the detailed
operations of the investments. Thus, they were not qualified to do the task of
supervision on operations. Therefore, the banks manipulated non-usury rates
into interest rate and actually, they entered the interest rate into the
calculation - though the existence of usury was not very obvious in the
calculations. But by scrutinizing the loan calculations, the amount of interest
was computable. Another problem is: the juristic inferences about usury in
different Islamic sects are different, and this subject caused some
differentials in usury definitions. Different definitions produced different
non-usuric banking products at an international level, in a case that some of
these products were not consistent with similar products of other banks. Even
in Iran, where the consistency was more than other countries the same result
happened and also the jurist's and economists' consensus in the time of
approving "The law of non-usury banking" in the early 1980s went to
conflicts.
Thus, the
general solution for the establishment of original non-usuric banking needed to
revise the whole problem from the basis. The present proposition is the result
of tough researches during the last ten years. We did our best to infer the
opinion of religion's legislator according to the logic and rationality of
theosophy (wisdom). We tried to re-infer the concept of usury from the Torah,
Bible, and Quran, and narrations first. Thus some measures for distinguishing
usury from non-usury were defined. These measures
explicitly define the non-usuric operations as the following items:
�
The sharing of a loaner in Profit and
Loss of loanee (the debtor)
�
No conditioning and not
predetermination of interest
�
Foreign exchange (without time-based interest) is non-usuric
�
All interests received from
consumption loans are usuric
By these measures, in the
next round, we examined the Islamic banking products. Deposit, loan, currency
exchange, bonds, valuable papers and metals, receive and payment orders and
credit operations were analyzed according to the above usury and non-usury
measures. Some products as Foroosh-e-Aqsati, Ijareh-be-Sharte-Tamlik, debt
purchase and sale, and composite interest derived from the inability of loanee
to repay the debt are usuric. Also giving loan facilities through non-interest
loan, civil Moshareka, legal Moshareka, direct investment, Modaraba, Salaf
transaction, Jjiale, Mozaraeh, Mosaghat, Ijarah, according to specific
conditions are non-usuric. In all of these products except non-interest loan
and Ijarah, which the rate of Ijarah should be predetermined in advance, the
interest rate must not be determined and conditioned. Otherwise, the contracts
become usuric. Foreign exchange operations in spot and swap transactions (in
case of not-existing interest rate in exchange calculations), options (in case
of a unique interest rate for two currencies), letter of credit are non-usuric.
But the foreign exchange operations of futures and time-based transactions
timed swap transactions; options and foreign exchange deposits enter into usury
realm. We examined all sale and purchase of bond papers, metals' transactions,
receipt and payment order, and banking credit operations and their
characteristics from the usuric point of view.
3. NUBankCo; the
Ultimate Idea is now feasible
According
to the findings of these analyses, the concept of �Non-Usury Bank Corporation
(NUBankCo)� introduced which can handle non-usuric banking operations. NUBankCo
was proposed as an economic firm where the depositors are her shareholders.
This bank is capable of handling non-usuric operations by distributing profit
proportionate to the share of shareholders (depositors). If the banks remove different
deposits differentials and increase transparency
and efficiency of banking operation, by removing the numerous deposit interest
rates and increase the participation in economic
activities, and if both private
and public, legal or real persons were able to participate, this will result to the efficiency
of financial intermediary role of the bank in
collection and
allocation of financial resources.
The growth
of information and communication technology (ICT) prepared suitable backbones
for the development and improvement of this type of banking. Thus, by
reanalyzing the problem with ICT considerations, the whole problem was
revisited. We tried to link financial accounts of loanees to bank databases
through IT. In case of establishment of this link, profit and loss
calculations, also bank supervision over the investment operations of investors
(loanee) becomes feasible. The latter is the main obstacle in designing profit
and loss sharing banking. In this stage, we tried to design integrated systems
through digital channels to encompass all affecting factors in banking
operations and supervisions as a chain and the real return of deposits
(investment) of depositors to be distributed through secure digital channels.
By using Enterprise Resource Planning systems (ERP), Customer Relationship
Management (CRM), Supply Chain Management (SCM), Management Executive Systems
(MES), Human Resource Management (HRM), Business Process Re-engineering (BPR)
and Work Flow Management (WFM) as core banking modules for non-usuric banking
we examined this integrated design. By this design, the commercial partners,
depositors, banks, central banks, Real-time Growth Settlement System (RTGS) investors,
financial markets, digital signatures authorities and also social security
organizations and government were linked through information and communication
technology systems. This connection could cause transparency of profit and loss
sharing banking, and by using an integrated automatic system the information of
depositors-bank- investor's triangle might be designed in a way that the
sharing in profit and loss of financial operations for the three groups of the
triangle happens. But, unfortunately, nowadays, weak facilities and equipment
of companies were obstacles to making this idea feasible and operational. This
idea will still remain un-operational for all size enterprises up to the time the interested commercial partners establish sufficient development
in IT-based procedures. But the idea is currently operational for
highly developed stock market digitally based companies.
4. NUBANKCO: The
implementation Method
All these
findings in these fields by presenting some papers at national and international
conferences were discussed, and we got elegant comments from these processes.
We understood that to solve profit and loss sharing (PLS) mechanism; we should
design a new solution to fit nowadays needs and be consistent with contemporary
workflows in legal operational and IT aspects. For these reasons, we tried to
design a new method for making PLS Banking operations. The new design is as
follows:
Disregarding
the public or private bank ownership, we should find a solution that interest
rate be determined according to the real sector return rate, and the bank
becomes as intermediate of resources who receive Haq-ul-Amal (a fee to follow
and care the depositors' rights and benefits by offering capital management
services to depositor and supervising on the agent's (entrepreneur's)
operations who make investment based on deposits of depositor(s)). The bank in
the position of an attorney or an agent receive capital management services fee
and will transfer the investment returns (profit or loss) to the depositor.
According to this definition, the agent bank as public or specific attorney by
using Moshareka contract can use deposited deposits in shape of Moshaa (joint)
and/or based on the depositor's request in specific product (of type 1 or 2) or
based on banks opinion (in product type 3) invest in the project or projects
and distribute the return of investment among depositors. The profit and/or
loss will be distributed among them according to the pre-written related
instructions. In this relation, the bank does the task of financial
intermediary, and after deducting her wage, as an attorney or agent will pay
the depositors' shares to them.
Finally, we
designed the operational sketch, and Bank Melli Iran (the biggest and oldest
Iranian bank) proposed to put one of its important branches to implement the
pilot project and test PLS banking at her own cost and risk. The system was
designed for three banking products:
� Moshareka (sharing Profit and Loss) on specific projects
� Moshareka (sharing profit and loss) on a basket of some projects
� Moshareka (sharing profit and loss) on the profit and loss of the
bank�s branch which implements PLS banking.
In a
Jiala-based contract, the bank will make a contract with depositors to allocate
their deposits to one of the above three products according to their requests
to get shares in profit and loss of the entrepreneur who implements the
project. In the other side of the bank, an entrepreneur is who has requested to
make a contract with the bank in a Moshareka-based contract. In this way, the
bank operates as an intermediate that receives Haq-ul-Jialah or Haq-ol-Amal and
allocates the deposit resources of depositors to investors. Depositors, in this
case, are financers and investors are those who do the entrepreneurship of the
investment. The profit and loss of this investment will be distributed among
depositors, investors, and bank. Bank by offering this service can earn some
share of profit/loss of these investment project as same as capital services
management fees. That is in PLS banking, the contracts between bank and
depositors and between bank and investors (entrepreneurs) can be performed
based on Karmozd (wage) as well as sharing on profit and loss.
An
entrepreneur is a legal person who combines her (cash or none-cash) capital
with the share of depositors in a Moshareka based contract through bank
intermediary to arrange a joint investment.
In this
method, a trustee agent (Amin) is a unit who supervise the contractor
operations on behalf of the bank for being honesty in carrying out the project,
controlling on executive operations along with announced programs, resources
allocation manner, and auditing financial statements. Amin (trustee) is an
institution who supervise the PLS process as a representative of Bank about the
good governance of the project, controlling the implementations according to
the declared plans, allocation of resources, optimal use of resources, � by
using key indicators and financial sheets auditing.
In Profit
and Loss Sharing (PLS) banking, the new financial innovations are used. PLS
banking will use new financial instruments and innovations such as Moshareka
(partnership) certificates for projects with specific ends and Pazireh
(subscripted) certificates for endless (productive) projects. Establishing of
secondary exchange market for the transaction of certificates, and various
insurance services will play important roles for activating and increasing the
efficiency of newly established virtual markets
The bank by
issuing and offering the Moshareka certificates and creating secondary markets
for transacting Moshareka certificates and designing baskets of Moshareka
certificates will efficiently activate this type of baking and also the other
related financial institutions. Implementing these arrangements needs
particular instructions. We have written the necessary instructions to perform
the job. Moshareka Certificate is no name papers issued by PLS banking branch
with a specific nominal price for a definite time (project implementation
duration). Moshareka Certificate holders will share profit and loss of project
prorated to their nominal price and time duration of their Moshareka
(participation). The bank will deliver a certificate of Moshareka and/or
receive a service fee for capital management services to depositors, which will
be according to one of the above three products.� Moshareka Certificate holders can transact
these papers through the internet or bank counter in the cyber environment, and
thus, this certificate can be transacted internationally as a financial asset.
Depositors
by accessing through information portal of internet station in the secondary
market of Moshareka Certificates or by going to one of the branches of the bank
performing the PLS banking and by receiving the consultation of the bank
experts in the information counter will be familiarized with different
Moshareka products and their conditions and regulations for depositing. Then
she will decide to select one of the products of the three mentioned Moshareka
products. By making the contract and the registration, the system will
automatically issue the Moshareka Certificate, and the Moshareka Certificate
will be accessible for the depositor. At the end of Mosharekeh period (for the
products 1 and 2 regarding a single project or a basket of projects), or at the
end of the financial year (regarding Moshareka in profit and loss of the branch
who perform the PLS), accounting/auditing counter by receiving the related
information will calculate profit and loss of the project or basket of projects
or branch and will distribute the profit and loss of the Moshareka and perform
account clearing.
The
entrepreneur also by going to the PLS banking branch will offer her investment
Moshareka project to the bank. The bank by declaring the conditions and
regulations of Moshareka to the customer through the information portal of
bank's Moshareka Certificates or information counter located in the PLS branch
pays a document fee (according to its instruction) and bank will receive the
proposal of the project with detailed economic, technical and financial
feasibility reports and other related information. Entrepreneur evaluation unit
according to the background of the entrepreneurs and according to specific
instructions will evaluate the entrepreneur and in case of a positive
evaluation of technical ability and expertise of entrepreneur will send the
related reports to the project evaluation unit. In case of a positive
evaluation of the project, project evaluation unit will determine the type and amount
of collaterals, guarantees, and Moshareka share according to the specified
instructions. The arrangement will be transmitted to the entrepreneur. After
making the contract, the requested and approved resources will be paid to the
entrepreneur through the contracted Moshareka contract. The whole documents
(according to related instructions) including: budgeting, timing plan, resource
needs and resource consuming manner, project implementation, phasing, quality
control, reporting, ending and delivering of the project should be delivered to
Amin (trustee) of the project by the entrepreneur. The reports of supervision
on the project and the quality of performance of the entrepreneur should be
delivered to the accounting/auditing bureau of the bank according to the
predetermined time schedules. It is obvious that the reports of the Amin of the
project will be the criteria of the following payments of the bank to
entrepreneur. At the end of the project and according to the instructions and
formulas relating to the amount of profit and loss of the project and the
Karmozd (wage) of the bank or her share will be calculated by the software of
accounting/auditing bureau. The share of the entrepreneurs and the depositors
will also be determined and will be transferred to their accounts. In the case
of reports of Amin regarding stop or delay of the project, the amount of delay,
and the loss caused by the delay will be calculated according to the given
instructions.
5. NUBankCo:
Structures and Instruction Codes
All of the
activities in this method will be done based on compiled instructions. The
framework and the organization of PLS banking are organized has been analyzed
in forms of required committees, units and departments tailored for the above
definitions. All the operations will be done according to the following
prewritten instructions:
� Instruction for evaluating the entrepreneur's ability including some
guidepost about technical capabilities and financial background, a grouping of
entrepreneurs regarding the type of project and types of collaterals and
guarantees and previous commitments and share of investment of the
entrepreneur, in three class of green, yellow and red
� Instruction for guarantees, hypothecs, and initial capital
� Instruction for necessary documents for evaluation of the project
� Instruction for receipts of bank
� Instruction for standards and obligations for supervision
� Instruction for reporting of entrepreneurs
� Accounting and auditing instructions
� Instructions for changes in timing and cost, including inflation
effects on income and cost and net return of the project, and also the
negligence of entrepreneurs resulting in a delay of commitments and changes in
the timing of the projects
� Instruction for new Moshareka (increasing the capital during the
implementation of the project)
� Instruction for clearing and the settlement of the account of the
entrepreneur
� Instruction for arbitration
� �Force majeure instruction
� Instruction for writing the PLS contract including Moshareka
Certificate and the contract between bank and depositor, bank and Amin, Bank
and entrepreneur
� Instruction for the capability of Amin
� Instruction for dispensing of depositors and premature account
clearing
� Instruction for transforming Moshareka Certificate into corporation
share in production projects
� Instruction for transacting Moshareka Certificate
� Instruction for Moshareka Certificate secondary market internet
platform including information portal, registration and membership, proposing
purchase/sale, communicating between seller and purchaser of Moshareka
Certificate, registration and inquiry
The
structure and organization of PLS banking regarding the above definition will
be done within a frame of:
o
Strategic decision-making committee in PLS
Banking.
o
Expert group for interpreting and revision of
regulations and processes of PLS banking�
o
PLS office including:
-
Legal Bureau
-
Project evaluation bureau
-
Auditing/accounting bureau
-
Financial engineering management bureau (back
office)
-
Amin (trustee) bureau
-
PLS branch
-
Information and consulting services bureau
-
Cash bureau
To
facilitate the Moshareka certificate operations, a bill of "Regulations of
issuing Moshareka certificate for PLS banking" has been written to be
ratified and be approved by the government. Auxiliary financial instruments and
innovations are about Moshareka Certificates Baskets regarding risk
determination in economic activities and determination of the weights of
economic activities in the basket; and classification of Moshareka Certificate Baskets;
and Moshareka Certificate Insurance; and typical contracts and usable forms in
PLS banking.
�In the pilot stage, a test of this type of
banking can be done by establishing a corporation inside a branch of an
ordinary bank, or by establishing a new branch for executing this type of
banking. In the first case, the banking activity of PLS will be done in
parallel with other activities of the branch, but all financial, accounting,
organizational and structural operations are separated from a legal point of
view and are due to the newly established institute/corporation.
We are
convinced that the current PLS system and NUBankCo will serve the entire
humanity and contribute to increasing wealth and abundance in the entire globe.
6. Executive
Implementation
Many economists around the world have
done their best to eliminate Riba from banking activities, but have not
achieved much. In this direction, Rastin Banking, in compliance with Sharia
commands, has been compiled not only to
eliminate Riba but also to institutionalize various teachings of
justice and Islamic ethics in banking activities. Good points of Rastin Banking
in all fields of banking, financial,
economic, ethical, social, and international activities are so expanded that it
can be regarded as a base to improve banking structure.
To increase the compliance of banking
system with principles and regulations of Islamic religion, and better access
to safe financial activity and helping the economy to bloom, fair distribution of possibilities and
opportunities, job creation and increasing the welfare of the society, the
Rastin Banking System was designed and all banks can carry out their activities
on this basis.
Rastin Banking System is based on special operational, financial, economic,
ethical, social, legal, international and organizational principles that based
upon the latest scientific achievements of humankind in the field of science
and technology with the aim of growth and development of the economy and banking
of the society.
In order to facilitate
legal activities of Rastin Banking, some improvements have been carried
out on auxiliary Islamic contracts. To fulfill the
necessary legislative needs of bank sharing activities, joint investment funds and facilitating social insurance
activities, some new legal institutions are also defined as "Fund with
variable capital". To
distinguish profit from Riba, certain
measures were also defined.
In order to prevent squandering (Israf) and to reform banking sources
consumptions, which have worse economic and social consequences than Riba,
and to increase efficiency, the bank is
obliged to follow specific regulations concerning its activities and finance
only those projects, which have observed certain considerations and criteria in
their project proposal.
Bank can finance projects of restoring
uncultivated lands by supporting qualified applicants for the promotion of employment and development of
agriculture, industry, mining, housing, and tourism in the development of different regions of the
country.
Bank and parties involved in Rastin
Banking contracts should observe the supervisory compiled regulations
concerning financial transparency, information disclosure,
and corporate governance. All contracts with the bank are considered as official documents and enforceable. These
contracts will be carried out by a unit
of execution of enforceable documents in
the bank.
7. Rastin PLS
Banking
In Rastin PLS banking as the main
subsection of Rastin Banking, on behalf of the depositor,
the bank finances entrepreneur for investment according to compiled
regulations, and at the end project, the entrepreneur
will distribute the profit/loss of the project in proportion to capital and
duration of using that capital with the depositor.
8. Rastin PLS Base
System
Rastin PLS Base system
refers to the main process and general regulations of Rastin Profit and Loss
Sharing (PLS) Banking system. On request and on behalf of the depositor, the bank invests his fund in one of
Rastin PLS products and instead, gives Rastin Certificate of the selected
project to him and allocates his fund to the selected project of the entrepreneur; and supervises the
implementation and execution of the project.
In the end, after deducting its own
commission, bank divides the profit/loss (if any) among engaged sides
(depositors and entrepreneur). The bank
is the agent of the depositor and is responsible for observing his
rights (depositor). He must use all his expertise to reach this end.
The fixed profit rate is
eliminated in Rastin PLS banking, and the return
rate is calculated according to the real return of capital in the real economy. Most of the regulations of Rastin
PLS Base system are extended to its financial subsystems. This system has its
own organization, structure, and working process.
9. Rastin PLS
Financial Subsystems
Rastin PLS financial
subsystems refer to specific financing methods or services in Rastin PLS
Banking. These subsystems work under general regulations of Rastin PLS Base
system:
� No
interest rate is involved in these bonds, and they are of four kinds: Central
Bank Rastin Swap Bond, Treasury Rastin Swap Bond, Bank Rastin Swap Bond, and
Commercial Rastin Swap Bond. They can be in domestic money or foreign exchange.
10. Rastin
Certificates
Rastin Certificates are a collection of designed certificates in Rastin
PLS Banking Base system and its financial subsystems. These certificates can be
anonymous or named papers, which are transferable and negotiable online through
the website of the bank and are issued
with a nominal price and for a certain period. The owners of these certificates
share the results of the project proportional to nominal price and
participation period of the certificate.
Various Rastin Certificates
and their characteristics according to the kind of participation in the PLS
Base system or its financial subsystems regarding the type of project and the
asset used as:
� PLS
Base: Musharakah (Participation) and Pazireh
(Subscripted) Certificates.
� JFS: Future
Certificate.
� MFS: Mudarabah
and Periodic Mudarabah Certificates.
� IFS:
Ordinary Mughasatah (installment),
Rental Mughasatah, and Musharakah Mughasatah Certificates.
� RFS: Mortgage
Sharing, Periodic Mortgage Sharing, Mortgage Mudarabah (commerce),
Periodic Mortgage Mudarabah, Mortgage Muzaraah (cultivating),
Periodic Muzaraah, Mortgage Mugharasah (planting), Periodic
Mortgage Mugharasah, Mortgage Musaghah (irrigation),
Periodic Mortgage Musaghah, Mortgage Istisna (industrial/manufacturing),
Periodic Mortgage Istisna and Rental Certificates.
� BFS: Bail
Certificate.
� RPS: Social
Security, Personal Security and Pension Security Certificates.
� RST: Takaful and
Loan Certificates.
11. Complementary
Systems
Complementary
systems of Rastin Banking refer to innovations, platforms, and supplementary
Rastin Banking methods and include the following systems:
12. Conclusion
To design operational Islamic banking,
we tried to mix theoretical and experimental knowledge to develop Rastin
Banking. Rastin Banking is a completely
new solution to banking based on Islamic and ethical teachings with the scientific and technological approach.
Some parts and modules of Rastin Banking
have been implemented in Bank Melli Iran. The installed parts of the system are
now functioning and have attracted depositors and investors, and since the
procedures and instructions are well defined, the bank's staff is performing
its procedures easily. The results of the test system are very satisfactory.
Rastin
Banking is a nationwide project with lots of subtle technical points. This
system is an open-source banking model, and all banks around the globe can
easily install and use it. We wish Rastin Banking could put important steps to
remove Riba and establish Islamic banking throughout the globe.
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