Banks and credit institutions have given an estimated 445.8 trillion rials ($1.26 billion) in collateral-free loans after the government announced the new lending program in January.
The money went to 1.216 million applicants from mid-January to November 22, the Economy Ministry reported Saturday.
In the past three months lending in the initiative reached 209 trillion rials ($592 million) or 46% of the total.
Collateral-free loans are given to salaried workers and retirees struggling with the cost of living crisis and galloping inflation.
As per Economy Ministry rules, the two groups can borrow up to 1 billion rials. The loans are subject to credit scores.
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 ministry data, Bank Sepah was the leading provider of such loans with 138.4 trillion rials ($392 million) to an estimated 477,000 applicants, accounting for 21% of the total.
Bank Tejarat and Bank Refah were next accounting for 16% and 10%, respectively. Qarz al-Hasanah Mehr Iran Bank and Bank Melli were the other major lenders.
Collateral-free loans are given by government and privatized banks. Reports say specialized banks owned by the government accounted for a meager portion of the lending, with Bank Maskan at the top.
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.
The Economy Ministry has said that loans without collateral is not with the aim to boost the government's popularity but to help revive the people's hope.
However, this lending initiative has 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 “draw on the available resources but under new lending arrangements.”
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 loans, borrowers’ check transaction performance and even their record in paying traffic fines and utility bills.
Under the credibility assessments announced earlier by the CBI, banks must 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 provides information on 34 million bank customers.
