The Effects of Recognizing The Legal Entirety in Analyzing Riba in The Financial Relations of People, Government, Commercial Banks and Central Bank

This paper tries to analyze the effects of recognizing the legal entity in conceptualizing “Riba” in the banking system. The results of the paper, which are derived based on an analytical-descriptive approach, show that when it comes to the issue of ownership, most of the Islamic scholars consider a legal entity just like a real entity. Hence, the legal entity is subject to all the rules that are related to ownership (like Riba prohibition). Accepting this view, will have some important effects in conceptualizing Riba in the banking system. Some of these effects are: Firstly, in all of the financial relations that the lending contract is formed between real entities or between real and legal entities, the lending happens from the Fiqhi view and hence Riba is available. Secondly, in all of the financial relations that the lending contract is formed between private legal entities or between private legal entities and governmental legal entities, Riba is existing. Thirdly, considering the financial relations between governmental legal entities, because of their unique ownership, the lending contract cannot be formed and hence Riba does not exist. Consequently, it is quite possible that one governmental legal entities (like central bank) transforms parts of its possessions to another governmental legal entities (like a national bank) and in future gets something more back. In other words, the relation is not Riba.