The design of instruments for government finance in an Islamic economy

الملخص EN

This paper attempts to present a viable approach for the design of an instrument of government finance (and monetary management) in an Islamic economy where conventional transactions based on an ex-ante promise of a risk-free rate of return are forbidden.

Resources to finance government infrastructural and development projects can be mobilized through the issuance of a national participation paper (NPP) and this instrument can also serve as an instrument of monetary management.

Various conceptional issues underpinning the introduction of such an instrument and methods of calculating a corresponding rate of return are discussed In principle, this approach has been accepted in Iran