Ways of Correctly Executing Participatory Contracts in Iranian Banking System

Almost all experts of the Banking Industry accept that the banking system has not given a satisfactory performance in implementation of the participatory contracts; the contracts which, in many academic literatures, have been considered as a distinctive feature of the Islamic Banking System. The present research consists of three main parts. In the first part, while discussing the current level of performance of the banking system of our country with respect to the application of the law of Interest-free banking activities, we have undertaken an analysis of the execution process of this law, with a statistical approach and referring to time series data of the Central Bank in relation with banking contracts. Subsequently in the second part, the hurdles related with proper execution of participatory contracts have been discussed. It has also been mentioned that what are the factors upon which the current performance of the banking network, regarding the execution of contracts based on participation and association, depends. In the third part of this research after an overall study into the nature of money market, we have enumerated its structural weaknesses in execution of this type of contracts. In the end we have recommended, benefiting from the mechanism and working of the capital market, in the form of investment funds, for better execution of contracts based on participation and have also mentioned, the difficulties and hurdles that lie ahead.