The Central Bank of Iran on Monday informed commercial lenders about new instructions related to microloans.
Applicants can now borrow up to 2 billion rials in microloans, it said. As per the CBI outlook, microloan is credit given to individual applicants for non-commercial needs and to help meet personal financial needs.
Under the instructions, lending will be mainly on affordability and credibility instead of collateral alone. Moreover, the CBI has diversified the types of collateral comprising a range of assets.
The regulations oblige banks to make inquiries about the credit background of borrowers, namely by checking whether or not they had bad checks and non-performing loans.
“Lending to those with bounced checks and NPL is prohibited unless they settle the debts,” the CBI said.
If applicants have defendable credibility, the bank can lend with a maximum of two types of assets as collateral.
The collateral can include checks and promissory notes, debt securities, shares of listed companies, units of exchange-traded funds, negotiable, personal auto, gold products and payslips.
Regard customers that lack credibility or credit scores, banks may lend maximum up to one billion rials with one of the above-mentioned guarantees.
Loans are offered at 18% interest.
Earlier in February, the Economy Ministry instructed banks to give microloans to salaried employees and pensioners without demanding collateral or guarantors.
As per the lending rule of the ministry, retirees and salaried employees can borrow one billion rials from banks without collateral.
Instead of collateral, employees should present their salary certificate for loans of up to half a billion rials. For loans above this amount they must submit a check or promissory note.
Under the credibility assessment announced by the CBI, banks will limit access of unruly customers to loans even if they put up the required collateral but had failed to settle their debts on time in the past.
The regulator has devised a platform for online inquiries on the credibility status at mycredit.ir website. The platform keeps data on 44 million IDs and can report on the status of 34 million bank customers.
Financial Inclusion
The CBI said easing access to bank loans is in line with the broader policy to improve financial inclusion, enabling people from all walks of life to benefit from bank resources, namely loans.
The regulator said it is working on ways to expand financial inclusion, covering a range of banking services, from opening accounts to customer credibility assessment and electronic signature.
Improving financial inclusion was one of the pledges made by Economy Minister Ehsan Khandouzi when he took office last August.
As per a World Bank norm, financial inclusion means individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.
For the minister, however, inclusion means allowing “equality in access to banking resources”, describing it a “paradigm shift” in the Iranian banking industry.
Addressing an Islamic Banking Conference in September, the minister underscored the role and significance of financial inclusion, saying so far this was absent in Iran as “people from different walks of life don’t have equal access to the financial resources of banks.”
The issue has received universal attention as 70 countries are now implementing financial inclusion rules, he recalled, adding that similar rules are being drafted in the Economy Ministry.
The ministry says financial inclusion is not limited to banks but other financial institutions and insurance companies need to revisit their financial policies in this regard.
