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Friday, 7 September 2007

Interest free banking system should be supported, Iranian President said

TEHRAN – Iraian President Mahmud Ahmadinejad has called for the establishment of an interest-free banking system based on Islamic principles. “Interest-free banking is a very advanced and unique system which is based on Islamic principles,” the president said on Wednesday at a gathering organized to introduce Tahmasb Mazaheri as the new Central Bank governor. Structural reforms should be made to establish this system, he added. Today there is an opportunity to revise the banking laws, he noted. “No economic activity is possible without assistance from banks,” he said. “If there is any problem in the banking system, it will negatively affect all economic sectors and the people’s lives.” However, if the banking system adopts a proper monetary policy, all other sectors of the economy will grow, he observed. Banks should not be involved in profit-making activities The president criticized the banks for becoming involved in the housing sector through construction and purchases of homes and said that the banks should not become involved in profit-making investments. Ahmadinejad rejected the theory that high liquidity would necessarily increase inflation, saying directing liquidity toward the production sector would certainly put a brake on inflation, and thus the economy would achieve a 9 to 10 percent growth rate. During Iranian calendar year 1385 (March 2006-March 2007), the country’s economic growth rate stood at 7 percent, the president asserted. About 70 percent of bank loans currently go to certain companies and persons, which is a policy that needs to be changed, Ahmadinejad stated. (TT, 6 Sep 07)
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