A recent study conducted by the Ministry of Cooperative, Labor and Social Welfare shows the people largely have access to the general financial services, however, such services have done little in the way of improving the quality of life.
The findings were published in a report "Poverty in Accessing Financial Services" by the ministry's Office for Poverty Studies, according to which banks failed to provide substantial credit, microloans and credit cards despite “sufficient numbers of branches, ATMs and POS terminals.”
In the rare study, the ministry said, "In the absence of credit cards, unlike other countries, Iranian families are obliged to go through the cumbersome process of taking out loans to solve their financial problems.”
"Debt-to-income ratio of Iranian families was 13% in 2018, which exposed the inefficiency of banks," the study found, and added that a small minority (9%) have credit cards.
Offering credit cards with easy conditions to a large segment of the population, mostly from the middle and lower strata, can promote the use of credit cards in Iran.
The Central Bank of Iran says it is laying the groundwork for expanding the use of credit cards as a resourceful and accessible alternative to microloans. For years banks have given huge amounts in controversial loans to big businesses while small loans are few and far between accounting for a tiny part of the total lending.
Past attempts at promoting credit cards failed mainly because of private banks' reluctance to get involved for hitherto unknown reasons.
Recent data shows 266,043 credit cards were used at least once during the month to June 22. This means that credit cards account for a tiny 0.22% of the 119 million active bank (debit) cards.
The study also referred to housing loans, as an example of macro loans, saying that home loans covered only 18% of the price of a housing unit in 2019-20. Besides, home loans accounted for 20% of households' debt.
Housing loans accounted for only 1.2% of the total lending or 61.7 trillion rials. Bank loans are simply off the mark and unable to bridge the gap between homebuyers' financial ability and the skyrocketing home prices.
The amount of loans banks give is, at best, negligible compared to the cost of an average residential unit as prices keep on rising at terrible speed and the value of the national currency declines as never before.
Moreover, life insurance penetration rate in Iran is 0.3% comparatively much lower than the 4.2% and 3.3%, respectively, for advanced economies and the average life insurance penetration in the world.
The share of life insurance in the overall portfolio of the insurance industry is negligible and it needs to grow faster to meet the targets outlined in national development plans, the report said.
Quantity
The study also reviewed the criteria for assessing financial services inclusion, saying banks have had a satisfactory performance in this regard. It said 94% of Iranians aged 15 or above had a bank account.
Bank accounts per 1,000 adults' ratio in Iran stood at 7,637 in 2017, which is higher than other countries.
There were 37 bank branches and 88 POS terminals per 100 adults in Iran in 2018.
