Reflections on the Relationship Between Central Banks and Islamic Banks in the Context of a Traditional System

Abstract

The article addresses the relationship between central banks and Islamic banks within a traditional banking system, focusing on monetary policy tools and their direct impact on the performance of Islamic banks. The study concludes that the use of traditional tools by central banks, such as reserve ratios, liquidity ratios, and discount rates, imposes constraints that conflict with Islamic principles, creating significant challenges for these institutions. These challenges include legal issues, the freezing of investment account funds, declining profits, and restrictions on investment areas, leading to an unbalanced competitive position compared to traditional banks.