Abstract
This paper discusses the legitimacy of securitizing the central bank receivables from the government and banking system in the Iranian financial market and making use of this instrument to conduct monetary policy. Ijtihad or independent jurisprudential reasoning based on Imamiah Fiqh (prevailing in the Iranian Islamic banking system), is used as paper methodology. The results show that considering the jurisprudential ‘ownership unity’ between the central bank, the government, and governmental banks in the Iranian banking system, securitizing the central bank receivables from the government or the governmental banks is not legitimate and not Shariah-compliant. Nevertheless, it is possible to issue debt-sale securities based on the debts of private banks to the central bank. Therefore, issuing debt-sale securities based on central bank receivables from the private banks can be considered a suitable instrument for conducting Shariah-compliant monetary policy in the Islamic banking system of Iran. This paper discusses for the first time the idea of issuing debt-sale securities as a monetary policy instrument in the Iranian financial system. Besides, the analysis is based on the Imamiah School of Fiqh, which is also new.
Highlights
By issuing debt-sale securities, governments and economic agents can securitize their receivables from others and, by selling these securities in the market, raise needed liquidity (Adznan, 2018; Shaikh, 2018).The characteristics of debt-sale securities are such that it is possible to use them as monetary policy instruments for the central bank (Saker, 2015)
Reviewing the bases of Imamiah Fiqh on the issue of debt-selling, this paper tries to discuss the possibility of securitizing debts that the Iranian government and banks owe the central bank
It should be noted that the jurisprudential analysis of this paper is based on Imamiah Fiqh, which prevails in the Iranian Islamic banking system
Summary
By issuing debt-sale securities (sale of debt securities), governments and economic agents can securitize their receivables from others and, by selling these securities in the market, raise needed liquidity (Adznan, 2018; Shaikh, 2018). The receivables will transfer from the government to the buyers of the debts They can sell these debts to others in the secondary market. Reviewing the bases of Imamiah Fiqh (jurisprudence based on the Shi’a School of thought) on the issue of debt-selling, this paper tries to discuss the possibility of securitizing debts that the Iranian government and banks owe the central bank. It tries to find out the principles that should be paid attention to in the design and usage of debt-sale securities to conduct monetary policy. It should be noted that the jurisprudential analysis of this paper is based on Imamiah Fiqh, which prevails in the Iranian Islamic banking system
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