The third pre-session of the Iranian Association of Islamic Finance (IAIF)’s 9th Islamic Finance Conference on "The Role of Islamic Financial Instruments and Institutions in Supporting Production and Controlling Inflation" was held on February 6, 2024.
Dr. Fereydoun Rahnamai Roudposhti, Secretary General of the Financial Engineering Association of Iran, Dr. Majid Karimi, Director General of Financial and Commercial Market Studies of the Ministry of Economy and Dr. Amir Hamouni, a member of the board of directors of Mapna Group, were the speakers of the session.

Majid Karimi listed the development of production level, price stability, increase in employment and lack of inflation among the goals of the economy, saying inflation means the increase in prices or in other words the decrease in the value of money. Inflation can reduce production, increase speculation, increase uncertainty and so on.

“The Mercantile Exchange has been able to partially control the issue of structural inflation. If the financial resources move towards production and productive investment, we will see a decrease in inflation.
The average inflation rate in the last three decades was around 33%, but the important issue is that in the previous years, it was above 50%.
When a credit boom is created, financial instruments can develop if they are used properly.

Irrational exuberance during a boom in capital markets can be challenging.
The reduction of discipline in the capital market will increase the moral hazard and unfavorable options and eventually increase the risk-taking of financial institutions” Karimi said.

Increasing jobs by listing companies in the stock market

Amir Hamouni, a member of the board of directors of Mapna Group, said it has been about 18 years since the approval of the Securities Market Law in 2004. Also, in 2006, the general policy of Article 44 was approved. According to that law, the capital market is highly significant.
“The financial instruments and institutions can play a prominent role in the inflation control, but we have not been able to display the capacities of the capital market for the activists and producers as it was expected.
The employment goes through the companies listed on the stock exchange, added: In addition large manufacturing companies, SMEs are also very important for the economy” he said.

Hamoni stated during my time in the stock exchange, the companies that had started their initial public offering, after two years, their workforce increased by about 50%.
Hamouni stressed that the GDP market cap is one of the indicators for measuring the maturity of a market in the world, mentioning examining the indicators can lead to a proper direction in the capital market trend.
He said one of the reasons why expansionary policies of central banks in the world do not cause inflation is due to the existence of financial markets and instruments used in them.

He emphasized that one of the reasons for the increase in inflation is the neglect of the capital market and the outflow of liquidity from this market, stressing in the last two years, good measures have been taken in the field of labor and it is expected that we will see its development in the future.
Somewhere else he stated the Ministry of Agricultural can control the cultivated area and prevent inflation by employing from financial instruments.

The pulse of the capital market in the hands of financial instruments

Fereydon Rahnamai Roudpashti, said our way of looking at the capital market, especially in the field of controlling inflation, is regulatory, emphasizing price discovery is considered one of the important issues in the regulatory, but we could not perform in this field as it was expected.
He added the capital market can be effective in regulating important sectors of the economy, such as agriculture and the central bank in which we need instruments.

“The capital market grows only when financial instruments are properly designed and implemented, because financial instruments are the pulse of the capital market.
To use the instruments, we need specialized stock markets, such as the real estate stock market”, he said.