A Glance at Rastin Banking

To design an operational Islamic banking system, we tried to mix theoretical and experimental knowledge to develop Rastin Banking. Rastin Banking is a completely new solution to banking based on Islamic and ethical teachings with the scientific and technological approach. Some parts and modules of Rastin Banking have been implemented in Bank Melli Iran. The installed parts of the system had well-functioning and attracted depositors and investors, and since the procedures and instructions are well defined, the bank's staff executed its procedures easily. The results of the test system were very satisfactory and more than expectation. Rastin Banking is a nationwide project with lots of subtle technical points. This system is an open-source banking model, and all banks around the globe can easily install and use it. We wish Rastin Banking could put important steps to remove Riba and establish Islamic banking throughout the globe.


Introduction
Many economists around the world have done their best to eliminate Riba from banking activities, but have not achieved much. In this direction, Rastin Banking, in compliance with Sharia commands, has been compiled not only to eliminate Riba but also to institutionalize various teachings of justice and Islamic ethics in banking activities. Good points of Rastin Banking in all fields of banking, financial, economic, ethical, social, and international activities are so expanded that it can be regarded as a base to improve banking structure in any country.
Designing financial systems are principally complex, and when combined with ideological subjects, the complications increase. Usually, parts, internal and external processes, and subsystems of this kind of systems are facing various problems that cannot be covered easily. By increase of complexity, management of the system needs complex and special tools and since the subject of the system is financial issues, and pecuniary matters are beloved by people, by considering the most pessimistic conditions, all probable types of failures to fulfillment of obligations should be recognized and predicted in advance to reduce all cases of dishonest behaviors. Because of this issue, even well-equipped rich banks throughout the world, in spite of knowing Islamic banking advantages, have not been able to implement the task fully; or changed their minds and returned back to interest-based banking to escape the complexities of real Islamic banking and went back to prefixed interest rate banking processes, instead of profit and loss sharing.
Designing true Islamic banking needs comprehensive knowledge of ideological (Fiqh, Sharia principles, commandments and logic), philosophic (individual rights and social justice concepts), economic (individuals, firms and market behaviors), financial (accounting, auditing, financial engineering), banking (project assessment and supervision, credit operation, transactions, investment and risk), legal (laws and regulations, contracts, legal and arbitration procedures), informatics (computer systems, networks, communications, programming), organization (pillars and institutions), management (administration, control, supervision, assessment), mathematics (applied mathematics, financial mathematics, mathematical modeling), financial instruments (prevailing financial papers and securities in financial markets), business and trade (business administration, marketing, international trade), capital market (capital market structure, laws and regulations), insurance (commercial, responsibility, assets, and accident insurances), standards (commodity and production) issues; and in addition, should be aware of the sociology and individual and social psychologies and their corresponding problems and many other various issues. Regarding the above subjects, Rastin Banking System was designed in Bank Malli Iran. The designer team of Rastin Banking tried to consider the processes, procedures, rules, and organization of the system comprehensively and after fifteen years of continuous work designed a total solution for Islamic banking which is unique and distinguished at international level. Rastin Banking system has all banking operations in itself. Establishment of the first profit and loss sharing branch (Ghoba) in Nov. 2010 clarified the defects of the system and new financial subsystems and complementary systems were designed and connected to Rastin Banking system because of derived operational feedbacks. Development of Rastin Banking came to a phase that other banks were interested in applying it to their own banks. Therefore, the "Compiling Committee of Operational Rules and Regulations of Rastin Banking" was established to compile the legal draft bills.
Rastin Banking is new Islamic banking, which has studied the theoretical and operational difficulties of the banking system of the country and offer legal and operational solutions on the basis of the latest scientific and operational achievements. Each subsystem, instrument, innovation, and operational procedure of Rastin Banking has been designed to remove an especial difficulty and satisfy markets and peoples' needs.
Rastin Banking fulfills all ethic definitions ever defined for ethic finance and even more. It holds the virtues of justice, charity, and generosity regarding dispositions to act in ways that benefit both the person possessing them and the person's society.1 Hence, Rastin Banking benefits both the financial institution that adopts it and broader society. In Rastin Banking, humans are bound, from the knowledge of their duty as rational beings, to obey the categorical imperative to respect other rational beings.2 This is extended in Rastin Banking that everybody had specific duties in relation to his role and endowed ability for financial intermediation. Moreover, in Rastin Banking, based on utilitarianism3 that asserts the guiding principle of conduct should be the greatest happiness or benefit of the greatest number is observable. In this context, Rastin Banking has been developed to ensure the facilitation of benefit for the largest number of people, while not harmful to anyone. Rastin Banking fulfills Islamic principles of ethics, wherein individuals and bank are duty bound to be accountable for each and every activity conducted by them and to do right in the context of God's laws.4 To increase the compliance of banking system with principles and regulations of Islamic religion, and better access to safe financial activity and helping the economy to bloom, fair distribution of possibilities and opportunities, job creation and increasing the welfare of the society, the Rastin Banking System was designed and all banks can carry out their activities on this basis.
Rastin Banking System is based on special operational, financial, economic, ethical, social, legal, international and organizational principles that based upon the latest scientific achievements of humankind in the field of science and technology with the aim of growth and development of the economy and banking of the society. For example: In order to facilitate legal activities of Rastin Banking, some improvements have been carried out on auxiliary Islamic contracts. To fulfill the necessary legislative needs of bank sharing activities, joint investment funds and facilitating social insurance activities, some new legal institutions are also defined as "Fund with variable capital". To distinguish profit from Riba, certain measures were also defined.
In order to prevent squandering (Israf) and to reform banking sources consumptions, which have worse economic and social consequences than Riba, and to increase efficiency, the bank is obliged to follow specific regulations concerning its activities and finance only those projects, which have observed certain considerations and criteria in their project proposal. Bank can finance projects of restoring uncultivated lands by supporting qualified applicants for the promotion of employment and development of agriculture, industry, mining, housing, and tourism in the development of different regions of the country.
Bank and parties involved in Rastin Banking contracts should observe the supervisory compiled regulations concerning financial transparency, information disclosure, and corporate governance. All contracts with the bank are considered as official documents and enforceable. These contracts will be carried out by a unit of execution of enforceable documents in the bank.
A collection of Rastin Banking approaches is defined in Rastin Banking Bill and Operational Bylaw of Rastin Banking. Regulations of this banking system and all developments, improvements and designing its subsystems and new processes or concordance new subsystems with prevailing processes should be carried out by considering the content of the cited Bill and Bylaw. In addition, all future supplements and operational workflows should be designed in a way that not to contain fixed interest (Riba) whether in cash or in other forms of future payment promises or by superficial contracts including the abstruse or disguised interest rate. Rastin Banking is an open source system, and interested readers can access all its detailed technical texts.5

Principles of Rastin Banking
To increase the compliance of banking system with principles and regulations of Islamic religion, and better access to safe financial activity and helping the economy to bloom, fair distribution of possibilities and opportunities, job creation and increasing the welfare of the society, Rastin Banking System was designed and all banks can carry out their activities on this basis. Rastin Banking System is based on special operational, financial, economic, ethical, social, legal, international and organizational principles that based upon the latest scientific achievements of humankind in the field of science and technology with the aim of economic and banking growth and development of the society.
As a brief description, the principles and characteristics of Rastin Banking are based on the following bases and principles: Operational Principles: By elimination of Riba from banking operations, Rastin Banking forbids superficial application of Islamic contracts and applies them in their real form, and bank acts as an intermediate between depositors and those who receive finance, and bank earns income through offering capital management services and not through interest rates spread. By allocating yield to the money source, the owners of the assets receive their share of profit or loss. All activities will be carried out mechanically and transparently through the internet according to compiled documented regulations. While safeguarding the interests of depositors, the bank is the trustee of the related parties, and the entrepreneur is certain that in the case of loss will not become bankrupt because of insurance coverage safeguards to depositors' deposits. Assessment, supervision, and operation of projects will be based on specialty, responsibility, and independent decision and position of assessor and trustee. The capability and credibility of the entrepreneur will be measured considering his previous tax payments records. The entrepreneur is responsible for his prepared information in his submitted project proposal.
Financial Principles: No bad or delayed loans will be created, and the bank will not bankrupt during the crisis. Because of lower involved risk, bank's capital adequacy rate decreases and bank free reserves increase; and regarding depository characteristic of the bank resources, the legal and precautionary reserves of banks besides central bank will decrease. Depositor, entrepreneur, and the bank will receive their fair share of the yields of sharing. Various financial instruments and banking processes satisfy different society's needs; and by relating Rastin Certificates prices to real sector returns, their prices are stabilized and not only bubble prices emerge, but people with various risk tastes are also attracted and increase the positive interaction between return and risk. Without needing any intermediary, everybody can enter Rastin Certificate Market. Information transparency will make related systems such as tax and social security systems transparent regarding economic activists. Reliable assessment mechanisms have been defined, and reliable supervision background has been provided. Entrepreneur is obliged to observe information disclosure rules relating his project; and by supervision on his operations, corporate governance rules are applied to entrepreneur's company, which leads to the transparency of all information and operations related to the project and asymmetric information and informational rents will be prevented and by applying for insurances, risks are minimized. While facilitating and speeding up the operations, it prevents money laundering and strengthens auditing and internal control of the entrepreneur's company. Online impalpable inspective monitoring prevents bank staff breaches. By separating the accounts, the account of each project and depositor will be kept separately, and the credibility of bank and banking operations increase.
Economic Principles: Rastin Banking decreases capital market deficiencies and contradictions of capital and money markets, and expands and strengthens the insurance sector in the economy. The increased confidence because of bank supervision on entrepreneur and internet accessibility to Rastin Certificate Market provide capital absorption and attraction capability and provides a safe competition environment for entrepreneurs, depositors, transactors and banks with the rivals. New financial instruments diversify financial assets, and by assigning Rastin Certificates to specific projects, goods or assets, paper markets are not generated. The involvement of capital in the project prevents quick movement of assets, which create financial crises because of the liquid flow of funds and by eliminating superficial paper market prevents debt-leverage based crises. Whoever is capable of conducting economic activity can receive financial fund or be employed in job vacancies created by entrepreneurs of the financed projects. Moreover, the application of various financial expertise expands related job opportunities, and all of these provisions improve investment, employment, production, and social welfare and restrict economic and financial fluctuations.
Ethical Principles: Obligation to release real and precise information and documents will persuade honesty and personal peace, and conformity of word and practice, and application of true supervision and decrease of uncertainty and social and individual mental tensions. Forbidding tricks and decrease of financial corruption because of the designed method of assessment, supervision and monitoring systems, and removal of moral hazards potentials lead to put everything in its right place and remove injustice. False devour, incurring a loss to others, betray, gambling and lottery, unfairness, grabby, extortion, waste and squandering, and speculation, conspiracy, and bribery all are forbidden in Rastin Banking and will be fighting against systematically. Observing the rights of weak, implementing financial justice, honoring and respecting rights of people increases mutual consent and benevolence and prevents riba and waste debaucheries openly.
Social Principles: Conducting activities according to pre-described procedures and rules provides the necessary background for regulating the right financial behaviors of people of society and obliges individual discipline. No discrimination, difference, or priority among those with similar characteristics is accepted in Rastin Banking. It teaches people to plan, forecast, and design their financial activities.
Legal Principles: Respecting property rights and individual rights in Rastin Banking is strong. By specifying various aspects of obligations of contracting parties, there will be less reason for juridical settlements; and arbitration facilitates dispute settlement among dissident parties. Moreover, queries of online databases restrict abuses. A new method of execution of enforceable documents in bank loans collection of claims.
International Principles: 7×24×365 internet accessibility to banking services throughout the world facilitates foreign investment absorption, which provides international mutual interests and political stability background. The virtues of Rastin Banking system introduce it as an operational ideal banking model at the international level, and development of Rastin Certificate Market at international level provides stable assets' anchor. Organizational Principles: Commensurate of the organization to needs, together with proper position appointment and promotion, and generally meritocracy including assignment of qualified persons, organizational communications, duties, responsibilities of personnel and effective punishment and award system are considered and defined in Rastin Banking. Organizational evolution, change, and stability are accompanied by standardization and documentation. Responsiveness of all personnel for their granted authorities prevents the appearance of harmful effects of unofficial organizations and political pressure.