The Iranian Association of Islamic Finance (IAIF) held a specialized session on “The Review of the Resolutions of the Shariah Council of the Central Bank and the Shariah Committee of the Securities and Exchange Organization (SEO)”, on December 26.
At the beginning of this session, Dr. Hossein Meisamy, Head of the Secretariat of the Shariah Council at the central bank, said the role of Islamic banking in controlling inflation and supporting production is really significant, going on to say that the basic issue that exists and should be paid attention to is related to the relationship between the monetary sector and the real sector of the economy. He added this issue is so important and can be considered as one of the fundamental principles of Islamic banking.

Meisamy said in Shia jurisprudence, all the rules and regulations are based on wisdom and expediency. The issue of supporting the real sector of the economy is one of them. Therefore, when we go into the details in banking and economics areas, we should not forget these expedients. If we look at Islamic contracts from this point of view, almost all our contracts are in accordance with shariah principles and real economic activity. This issue is clearly defined in partnership agreements. In all partnership agreements, there is a commodity and it is clear that this monetary exchange is effective in the real sector.

He mentioned swap contracts are entirely based on the support of the real sector. Some of them, like Istisna, are in the direction of producing goods and some of them, like Murabaha are in the direction of exchanging goods that have already been made.
As to the role of the Central Bank in the arena of the entire economy. Meisamy said the Central Bank does money creation with the aim of making the balance sheet positive, and when it enters the banking network, the power of banks to generate money increases.

On the other hand, there is a kind of money creation that is done internally and is tied to the real part of the economy. When the money creation is tied to the real part of the economy, on the assumption that Islamic contracts are implemented in a completely correct and real way, they can control the creation of internal money.
He stressed that another issue was the financing of leasing companies. Leasing is one of the instruments that have a very low level of unreality and this type of contract is very suitable for Islamic economy. But contracts like Jaala or Mudarabah are more likely to be fictitious.
Meisamy stated that the Ijarah contract with the condition of ownership is one of the most widely used methods in the banking system and this method is considered very simple, moreover, Islamic financing can be done very quickly through it.

Dr. Majid Pireh, Secretary of the Shariah Committee at the Securities and Exchange Organization, as the second speaker said in the field of capital market, we are facing two issues, the first one is related to development and in this regard, there is a discussion about financing bonds and risk coverage. In the field of risk coverage, we are trying to design instruments that cover the rate of return so that it is not affected by a fluctuation in the value of assets, and through this instrument, the risk is covered and this fund provides both the possibility of earning profit for capital market participants and risk coverage.
He added beside the development, the Shariah Committee of SEO has also worked on reforms. For example, certificates of deposit are used for storable goods, but they cannot be used for some goods and in order to use them, amendments were made.

Pireh went on to say that the next issue is the futures contract based on the portfolio of Islamic treasury bills. In this contract, the parties undertake to trade a certain basket of Islamic treasury bills at a certain time in the future at a price that is determined at the time of concluding the contract. The characteristics of the portfolio of Islamic Treasury bills are as follows:
• In this basket, there are different Islamic treasury bills that have different periods of time until their maturity.
• The maturity of each of the Islamic treasury bills in the basket is at least longer than the maturity of the futures contract.
• The composition in the basket is known to the parties at the time of concluding the futures contract.
• The price to be paid for this portfolio of bills is known to the parties at the time of concluding the contract.
• The bills in the basket are selected in such a way that they can be delivered at the futures contract maturity.

Pireh emphasized the issuance of Murabahah bonds for financing the employer in the Engineering, procurement, and construction (EPC) contract is one of the latest instruments approved by the Shariah Committee. The EPC contract is one of the solutions used to build or develop a specific plan. In this contract, the employer and the contractor agree on a set of matters as follows:

1) The contractor undertakes to use his expertise in order to carry out the design related to the technical infrastructure to fulfill the subject of the contract within a specified period of time and clearly declares the requirements for the fulfillment of the subject of the contract and receives a specific amount in return.
2) After providing the required equipment, the contractor will receive a certain amount of money for installing the equipment and taking appropriate measures in order to pave the way for gaining productivity.
3) The contractor is obliged to finally hand over the work to the employer in a way that the subject of the contract has been fulfilled according to the initial agreement and if in the final output of the project a problem comes up, the responsibility lies with the contractor.

The Secretary of the Shariah Committee of the Securities and Exchange Organization pointed to the swap contract of energy carriers, saying the swap contracts are used for the exchange of two assets. In this case, the parties agree to exchange certain assets at a certain time according to a mechanism whose details are agreed in advance. The features of the contracts are as follows:
. Exchange of assets that are of the same material; like exchanging crude oil for crude oil.
. Exchange of assets that are not of the same kind but are considered derivatives of a given product; like exchanging diesel for gasoline.
. Exchange of assets that are not of the same type and are not derivatives of a given product; like exchanging crude oil for wheat.
At the end, Majid Pired mentioned there are good capacities in the field of energy in Iran, stating if we implement swap contracts with other countries, the costs will decrease and Iran Energy Exchange has the capacity to issue such a contract.