Sharia and legal challenges of compensating for currency devaluation in the Iranian banking system

Abstract

Abstract
Devaluation is one of the important economic phenomena in inflationary societies that has significant effects on contractual relations, especially in the banking system. Compensation for devaluation refers to mechanisms designed to maintain the real purchasing power of debt and financial claims so that the economic balance of contracts is not lost over time. This issue is of particular importance in the Iranian banking system, because on the one hand, banks operate with contracts based on Islamic contracts, and on the other hand, severe inflationary fluctuations can significantly reduce the real value of monetary obligations. The main issue of the present study is to examine the question of whether compensation for devaluation in the Iranian banking system is consistent with the standards of Islamic jurisprudence and legal principles, and if possible, how its limits and conditions can be explained. On the one hand, some views consider such compensation close to usury and doubt its legitimacy, and on the other hand, a group of lawyers and jurists consider it justifiable by citing rules such as exchange justice, harmlessness, and preserving the real value of property. This research was conducted using a descriptive-analytical method and using library resources including jurisprudence books, legal works, banking laws, scientific articles, and some judicial procedures. The data were examined through the analysis of jurisprudence and legal texts and a comparison of views. The research gap in this area is due to the lack of a coherent framework for combining jurisprudence considerations and the economic necessities of the banking system. Many studies either have a purely jurisprudential approach or are purely economic, and fewer studies have attempted to systematically integrate these two areas. The research findings show that by dynamically interpreting some jurisprudential rules and paying attention to the goal of justice in transactions, it is possible to design mechanisms to compensate for the devaluation of money, provided that these mechanisms are not considered as guaranteed usurious profits and have a specific contractual and legal basis. Accordingly, it is suggested that: first, the legislator should develop a transparent framework for adjusting monetary obligations in proportion to the inflation rate; second, banks should use legitimate contractual tools such as adjustment clauses or limited indexation; and third, jurisprudential and banking institutions should work together to design a local and Sharia-compliant model to preserve the real value of debt.