The Risk in Bank Charges Mechanism of Iranian Petroleum Buyback Contract: Regarding Islamic Approach toward Financing
Article from: OGEL 3 (2017), in Middle East, Buy Back Contracts
Abstract
In Iranian Buy-back contracts, there is a category of cost known as bank charges; the cost of money dedicated to the project. Islamic rules prohibit receiving or paying interest on money unless in the context of profit and loss sharing. Bank charges are based on LIBOR as a standard interest rate, therefore the payment of bank charges in the Buy-back contracts is not based on the criterion of profit and loss sharing. This issue raises doubts on such payments, suggesting them to be in contradiction with the imperative Islamic rules. Moreover, regarding the legal system of Iran, ...