Banks and credit institutions gave 236 trillion rials ($747.5 million) in collateral-free loans after the government announced the new lending program in January.
According to a press release of the Economy Ministry, the money was given to 703,460 applicants from mid-January to August 22.
Loans allocated in the fifth month of the year reached 77.4 trillion rials ($244.2 million) or one-third of the total under the initiative.
Collateral-free loan refers to the government scheme obliging banks to lend to salaried workers and retirees, under pressure due to the high and rising cost of living without demanding collateral or other guarantees.
As per Economy Ministry rules, the two groups can borrow up to 1 billion rials without collateral. The loans are paid based on the credit score.
Instead of collateral, workers need to present their salary certificate for loans up to 500 million rials. For loans above this amount they should submit a check or promissory note.
According to the ministry data, Bank Sepah was the leading provider of such loans. It gave 77.4 trillion rials ($244.2 million) to an estimated 274,000 applicants, accounting for 33% of the total.
It was followed by Tejarat Bank and Qarz Al-Hasanah Mehr Iran Bank, accounting for 18% and 14%, respectively, of the total collateral-free lending. Bank Refah and Bank Melli were the other major lenders.
Collateral-free loans are given by government and privatized banks. Figures indicate specialized banks, owned by the government, accounted for a meager portion of the lending, with Bank Maskan topping the list.
Banks have long been accused of giving unusually huge amounts in controversial loans to big businesses and vested interest, but small loans are few and far between accounting for a meager part of the total lending.
The Economy Ministry says loans without collateral is not to boost the government's popularity but to help revive the people's hope.
However, the latest lending initiative unleashed strong criticism against the government for overburdening banks with mandates that add to the myriad of problems of the struggling banking industry not unfamiliar with poor performance.
In response to the criticism, the ministry says banks are not supposed to allocate extra funds for such loans and should use the existing resources but under new lending arrangements.
It noted that such funds are available only to salaried employees with good credit rating.
Despite the ministry’s emphasis on credibility assessment before granting loans, there is no clear-cut criteria for such appraisal.
Earlier the Central Bank of Iran said the basis for credibility assessment could vary and include factors like the borrower’s financial track record, including past borrowing, borrowers’ check transaction performance and even their performance in paying traffic fines and utility bills.
Under the credibility assessments announced earlier by the CBI, banks limit access of unruly customers even if they put up proper collateral but failed to repay debts on time in the past.
The regulator has introduced a platform for online inquiries on credibility status at mycredit.ir website. The platform keeps data on 44 million IDs and is able to provide information on 34 million bank customers.