Adverse Selection and Moral Hazard and Their Methods of Management in San'at o Ma'dan Bank and the Islamic Consultative Assembly Member’ Bill

Although it has been for three decades that the law of without-riba (no-usury) banking operations with its unique features has been implemented, the practical difficulties and shortcomings of the contracts, especially contracts of partnership, have led to many bank transactions in the form of non-partnership contracts. The banking system is an important and influential component of each country's economic system. One of the challenges of the without-riba banking system is the issue of asymmetric information between the bank and the applicant in the contracts of partnership. The existence of asymmetric information leads to the emergence of adverse selection and moral hazard in the markets. Responding the main question of the research, that is, what the ways of adverse selection and moral hazard management in San'at o Ma'dan Bank are, and also taking advantage of descriptive-analytical method, the study examines some hypotheses which state that several ways, including screening and monitoring, long-term relationship with the bank, and the loan services’ facilities are very effective for handling adverse selection and moral hazard. The findings of the study indicate that through the methods of management and control, San'at o Ma'dan Bank, focus its attention on the thorough investigation of the bill and the required supervision. Consequently, the proposed bill of the Islamic Consultative Assembly through presenting some methods can manage these two problems for the banks which use contracts of partnership.