Moreover, repayment of interest to lenders is not viable as the internal rate of return and also production return rate, in the wake of the recent recession and inflation in past years, have hit rock bottom. Thus, Iranian borrowers are simply not able to pay pack their liabilities to the banks.
This has in turn led to financial resources becoming frozen and banks becoming incapable of providing financing for other enterprises in need of capital. In this vein, Iran Fara Bourse has come up with diverse Islamic tools, as highlighted above, to assist borrowers in need of capital.
For instance, for those sectors lacking sufficient capital to buy raw materials, IFB has introduced Murahaba sukuks, an interest-free loan that provides credit sales in compliance with Sharia. Financing via this mechanism allows companies with weak balance sheets to continue operating, thus allowing them to generate tax revenues while keeping themselves financially healthy.
Moreover, the introduction of Islamic T-bills last autumn and continued issuing of such instruments has quintupled the amount of sovereign debt instruments. Of note, sovereign Sukuk, Ijarah, and Sovereign Settlement Bills are next in line for issuance for the coming Iranian fiscal year, beginning March 20. The budget motion put forth for the next Iranian fiscal year outlines the issuing of 225 trillion rials ($7 billion) of debt, of which 75 trillion rials ($2.5 billion) will be issued in the form of Islamic T-bills and the remaining portion in the form of Sukuk.