Since the Iranian revolution of 1979, the Iranian banking system and practices have changed significantly. Shortly after the revolution, according to a decree by the Revolutionary Council, banks and insurance companies were nationalized. In 1980 and 1982 legislation was passed to convert all banking practices to Islamic interest-free banking. Despite such significant developments in the Iranian banking system, this area of research has not been given its due attention by the scholars in the field. It is the purpose of this study to describe the process of post-revolutionary change in the Iranian banking system and outline the new trends in credit rationing practices after the revolution.
It will be argued here that the Islamization of the banking system did not result in the so-called abolition of interest from the financial system; in practice the banking system continues to pay interest—now called “profit“—to savings account depositors, and standard interest-bearing financial contracts continue to be utilized by the banks under new Islamic terms.