The Majlis Social Commission has decided to raise the ceiling for marriage loans to newlyweds in the next fiscal year that begins in March.
Debating the proposed 2023-24 budget, lawmakers have apparently decided to increase the loan by at least 25%. If it becomes law, the amount will increase from the present 1.2 billion rials to 1.5 billion rials per couple, said Vahid Yaminpour, deputy minister of sports and youth affairs, dolat.ir reported.
The loans will increase to 4 billion rials per couple if the bride is below 23 old and the groom under 25, he said.
"The government wanted the Majlis to approve bigger increase for marriage loans, especially for younger people," Yaminpour said.
Marriage loans are interest-free repayable in seven years. Couples can apply up to two years after the pronouncement of their marriage. The government doubled marriage loans for the outgoing year.
Banks are obliged to lend in the form of as Qarz-ol-Hassanah schemes (interest-free microcredit) despite mounting concern about the detrimental impact of the heavy burden on the already troubled banking industry.
The subsidized loan schemes demanded from banks has undermined their already overstretched resources and pushed many in a precarious condition.
Prominent economists and senior bankers have censured policy and decision-making bodies for imposing such obligations on banks to keep lending beyond their ability and capacity.
Iraj Nadimi, an economist and a former MP, is of the opinion that subsidized loans “do not necessarily” hurt bank resources so long as the government pays the difference in the interest rate paid by borrowers and those set by the Money and Credit Council.
"However, when the rates are set arbitrarily, lenders face challenges" and are unwilling to give such loans, Nadimi said.
"Banks use deposits to give loans. Any hasty decision to support the [needy] people can put their deposits at risk. Therefore, banks need to be reimbursed for the cheap loans in accord with budgetary requirements.”
In fiscal 2023-24 lenders are mandated to allocate up to 2,000 trillion rials ($4.92 billion) in interest-free lending for government-led programs like loans to newlyweds, for childbirth and to support households struggling with the worsening cost-of-living crisis.
Lending Largesse Is Unsustainable
The new CBI boss Mohammad Reza Farzin has urged the parliament to take banks' shrinking resources into account before deciding the lending largesse.
Referring to the 2023-24 budget bill now in parliament, he urged MPs not to order banks to give loans as it would further undermine the troubled banks and the overstretched banking industry.
CBI figures show banks gave 1,390 trillion rials ($3.42 billion) in loans to encourage youth marriage and childbirth since the beginning of the calendar year that ends in March. Almost 1,027 trillion rials ($2.52 billion) in marriage loans went to 743,000 applicants -- up 51% on the same period last year.
A recent study by the Majlis Research Center found major problems in the process of allocating marriage loans.
The study published on the website of the influential think tank showed only 46% of marriage loan applicants managed to get the money. The figure was 66% in the same period last year.
West Azarbaijan Province had the worst lending performance in this category as only 36% of the applicants got the money. MRC said banks in this province have made the “bureaucracy of assessing loan requests more complicated as they interview couples and conduct enquiries about the authenticity of the marriage.
The report also reviewed age groups, based on which lenders gave applicants aged 50 years and above 1,109 trillion rials in marriage loans. The Central Bank of Iran says those in this age bracket are not eligible for such loans.
According to the rare study, there has been a huge age gap between couples tying the knot. Almost half the women who took out loans were 23 or younger, while 64% of men were aged above 25. The think tank proposed a revision of methods for checking the authenticity of marriage contracts.
Government lending is to help boost population growth. For years sociologists have warned that the population is ageing and the youth are mostly disinclined to start a family or have children due to the lack of jobs, unstable economic conditions, galloping inflation, prohibitive housing costs and an uncertain future.
