The Central Bank of Iran says it supports the growth of "buy now pay later" (BNPL) services because of its acceptable impact on the economy.
Mehran Mahramian, the CBI deputy chief for innovative technologies, said this week the regulator’s only concern is the interest rate on credit given to users of BNPL platforms, way2pay quoted him as saying.
BNPL is a type of short-term financing that allows consumers to make purchases and pay at a future date, often interest-free. Such credit schemes are often easier to get approval compared to traditional credit cards or other lines of credit.
"BNPL platforms are gaining popularity because of the credit rating system…The link to a credit rating system addresses the concerns of the regulator vis-à-vis BNPL services," Mahramian said.
Last year, the CBI published rules for setting up credit rating firms. They must scrutinize the financial records of clients and report on the credibility of individuals and corporates by assigning scores on a scale of "very poor", "poor", "average", "good" or "very good".
Ratings are determined after assessing the financial performance of the customer within a fixed period plus solvency, ability and willingness to pay. Scores indicate credibility and discipline in meeting debt obligations.
The move was a part of the CBI’s measures to promote credit cards and small loans. While the demand for easy credit services is high in Iran, most bankers are averse to the policy mainly because of the infeasibility of such services compared to other [printable] activities.
The CBI official noted that banks want to sell credit cards because it would increase their revenues however, "allocating credit, either as BNPL or credit card, must be within the regulatory framework."
Ilia Consultation Institute, recently published a report about people’s expectations from banks and credit services, revealing that 83% of the respondents were not satisfied with the financial services of banks.
Unreasonable demands for taking out loans, especially for collateral, is a key complaint of the large majority against the banks, both private and state-owned.
The report revealed that nearly 15% of borrowers regretted taking bank loans. This was while 64% of the users of innovative lending platforms were satisfied with the services.
According to the report, about 4.5 million people in Iran have used innovative lending solutions, including BNPLs.
Snapp Pay, DigiPay, WePod and AzKiPay are the major providers of BNPL services.
The annual report of Digikala, Iran's largest electronic retail platform, shows 5.5% of the purchases were made using BNBL in the last Iranian year.
Snapp!, a major Iranian tech firm, also claimed in its annual report that it made the BNPL service available to 4 million of its users last year.
According to a recent report "Poverty in Accessing Financial Services" by the ministry's Office for Poverty Studies, banks failed to provide credit, microloan 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 households are forced to go through cumbersome processes if they need a loan.”
The total number of credit cards, with at least one monthly transaction, increased 15% to June 20.
The last monthly report published by Shaparak, the company in charge of supervising and maintaining the domestic payment network, shows that the number of active credit cards reached 625,632 during the period. Credit cards still account for a miniscule 0.47% of the total bank cards in Iran.
As per CBI rules, banks can issue credit cards with a maximum spending limit of 2 billion rials ($7,400). Cardholders are given 12-36 months to settle their bills at a maximum 18% interest set by the Money and Credit Council.
