Mohammad Hossein Hossein Zade Bahreini; Saeed Malek Sadati
Abstract
The distinctive feature of Islamic banking compared to other banking systems is necessity of bank participation in the risk that credit recipient endure in his production. In the other word, it is expected that Islamic banks provide venture capital to manufacturing firms. However, it seems that in practice, ...
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The distinctive feature of Islamic banking compared to other banking systems is necessity of bank participation in the risk that credit recipient endure in his production. In the other word, it is expected that Islamic banks provide venture capital to manufacturing firms. However, it seems that in practice, Bank's inability to perfectly monitor lending process and remove information asymmetry with respect to customers, have made the banking system to avoid risk trough lending based on fixed interest rate neglecting the fact that productive activities will endure the most effects.
This paper evaluates the performance of Iran's Islamic Banking in Providing Venture Capital. So it evaluates simultaneously the performance of banking system in practice and attitudes of related groups -about this performance. The results show that not only banking system has failed in providing venture capital, related groups such as employees of banking system, members of parliament, researchers in University and seminary, and bank's customers doesn't have positive attitude about performance of banking system in providing venture capital.
