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Proposal for "Rationalizing" The Rate of Profit of Bank Loans: A Critique

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  • S. Soofi , Abdollah

    (University of Wisconsin-Platteville)

Abstract

In winter 1383, the center for Research of Majlis Shura Islamic of Iran (CRMSII) published a proposal on the logic of the prevailing profit rate that the commercial banks pay/charge on long-term bank loans requiring the executive branch of Islamic Republic to lower the average rate of profit by 4.5 percent within 18 months of passage of the bill by Majlis, to reduce government budget deficit by 20 billion rials, to reduce another 4% in the profit rates all within two years after passage of the bill and to provide quarterly report to the Majlis on implementation of the law by the executive branch. In what follows, I would state and examine both empirically and theoretically, the validity of the arguments in support of legislative action on defending the rates of profits charged and paid by the banks.

Suggested Citation

  • S. Soofi , Abdollah, 2009. "Proposal for "Rationalizing" The Rate of Profit of Bank Loans: A Critique," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 5(3), pages 127-141, July.
    • Handle: RePEc:mbr:jmonec:v:5:y:2009:i:3:p:127-141
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    References listed on IDEAS

    as
    1. Allen Schick, 2007. "Performance Budgeting and Accrual Budgeting: Decision rules or Analytic Tools?," OECD Journal on Budgeting, OECD Publishing, vol. 7(2), pages 109-138.
    2. Jón R. Blöndal & Daniel Bergvall, 2007. "Budgeting in Austria," OECD Journal on Budgeting, OECD Publishing, vol. 7(3), pages 1-37.
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    More about this item

    Keywords

    Profit; Bank Loans; Interest rates; Rationalization;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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