The Relationship between the Central Bank and Islamic Banks in Iraq: Obstacles and Proposals

Abstract

The significance of the relation between the Central Bank and Islamic banks comes from the role that is played by the financial system in financing the projects in the country. It also comes from the missions and responsibilities of the Central Bank in issuing, keeping, canceling, replacing and destruction of the paper money within the so called (cash offer). As a governmental bank that is described as the 'father' of all banks, the Central Bank is in charge of keeping the value of the national currency inside and outside the country. The Central Bank has another mission that is to fix the price of the local currency against the foreign ones. It also has to determine and control the models of banking system (private and governmental) by imposing a certain percentage on legal cash reserves. In light of this surveillance by the Central Bank, this paper comes to the conclusion that it becomes so necessary to revise that percentage within the relations between the Central Bank and Islamic banks so as to ensure that the majority of the money is invested.