The Effects of Iran Economic Conditions on Weak Performance of Islamic Banking System in Iran

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The newly established system of Islamic economy in Iran, specifically the non-usury banking system is in need of appropriate conditions to attain its goals. The special economic conditions of Iran (Stagflation Conditions) after the Islamic Revolution which was rooted in weak pre-revolutionary situation made non-usury banking system encounter problems and people have great doubt about the semi-usury system of banking. The major causes of the problem were related to the nature, structure and state of implementing of law. This article shows that the special economic conditions of Iran after the Revolution have acted as an obstacle in reaching a non-usury banking system. High inflation rate increases the interest rate; hence the sense of misgivings about the usurious condition of the existing system rises. High unemployment rate, weak technical and financial bases in economic institutions, speculative spirit instead of production in the country, economic misuses in different extents, high credit risks, restriction in the selection of external financing methods, etc. have made the implementation of Islamic contracts impossible.

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