Banks gave 19,540 trillion rials ($59.4 billion) in loans since the beginning of the fiscal year in late March -- up 49% on the same period last year, head of the Monetary and Credit Affairs Bureau of the Central Bank of Iran said.
"Loans for working capital accounted for the major part of the lending during the first half of the year with 67% of the total," Mohammad Nadali was quoted by IBENA as saying.
Subsidized loans also accounted for a portion of lending portfolio this year, Nadali said.
“A big part of the loans were given for marriage purposes and childbirth. Over the period under review, 534,000 marriage loans worth 735 trillion rials ($2.23 billion) were taken out, 55% higher from the same period last year plus 431 childbirth loans worth 170 trillion rials ($517.03 million)”.
As the population ages and dire economic conditions take a toll shrinking the size of families and delaying marriages, banks were obliged in mid-April to lend to young parents to encourage childbirth. The money is given to couples who had a child in the previous fiscal year (March 2021-22) and after.
First-time parents are eligible for 200 million rials for the birth of the first child, 400 million rials for the second child, 600 million rials for the third, 800 million rials for the fourth and 1 billion rials for five children and more.
Marriage loans are interest-free repayable in seven years. Couples can apply up to two years after the pronouncement of their marriage.
The government doubled marriage loans this year. As per the 2022-23 budget, each partner who ties the knot is eligible for 1.2-billion-rial loan. To help encourage early marriage, lenders are required to grant 1.5 billion rials per partner if the bride is below 23 years and the groom under 25.
According to the CBI official, lenders gave security deposit loans worth 53.5 trillion rials ($168m) to 94,000 applicants wanting to rent a home.
Security deposit loans were announced by the government in 2020 as a coronavirus aid package for the large numbers unable to rent a home due to the historic increase in rents and home prices in almost all urban regions across the country.
Lenders are required to provide eligible applicants loans for renting a home up to 1 billion rials in Tehran City, 700 million rials in other big cities and 400 million rials in different urban areas.
Lenders are mandated to continue lending in the Qarzol-Hassanah (interest-free microcredit) schemes despite rising concern over its detrimental impact on overstretched bank finances.
The subsidized loan schemes demanded from banks has undermined the already tight situation of lenders, academia and economists have warned as lenders come under increasing criticism from across the political spectrum for their poor performance and lack of transparency.
Monetary Policy
The official said that the CBI’s operations are in three main areas, namely credit, open market operations and new instruments for supply chain finance.
“In the past CBI interaction with banks was restricted to credit. The CBI addressed banks’ financial needs by opening credit lines. With the onset of open market operations new ways were introduced, other than credit lines, for meeting the immediate requirements of banks.”
Nadali said the CBI’s open market operations focus on providing bank needs indirectly, largely via weekly bond sales and structured lending.
Structured lending refers to a process through which banks put up bonds as collateral with the CBI to borrow money.
“These loans are collateral-based and wholly under the control of the CBI, which can be used for regulating banks' activities.”
Regarding financial supply chain issues, he said that with new interventions instead of offering cash loans, banks give production chains credit facilities like electronic bank drafts and letters of credit in the national currency.
In January the CBI launched the SCF scheme to improve lending efficiency and navigate bank resources toward the production sector.
SCF involves automating transactions and tracking invoice approval and settlement processes, from initiation to completion. Under this framework, buyers agree to approve invoices of suppliers for payment by a bank or other outside financiers.
