The head of Iran Consulting and Credit Rating Company says a new credit rating system will be unveiled in the next few months.
"The new system assigns a score to each Iranian individual, which will be used for assessing people's creditworthiness more effectively," Way2pay.ir also quoted Reza Qasempour as saying.
According to an official statement, ratings have so far been based on data provided by the banking system and the new model attempts to diversify the sources and the scope of financial data.
Various entities are expected to help provide data to the new system, including startups, insurance companies and tax administration.
Credit rating is a key prerequisite for offering facilities to bank customers, which was started a decade ago.
"We have managed to provide credit companies access to a comprehensive database of the people's financial records," Mehran Mahramian, CBI’s deputy for innovative technology, said earlier.
“Access to data [about people's financial transactions] was the main challenge before establishing a robust credit rating system. The government required CBI to address the problem in 2017 when efforts for creating a workable model for ratings gained pace and we are about to unveil it,” he added.
Mahramian noted that credit rating will top the CBI's innovative plans come April, as it would help ease people's access to banking loans and facilities.
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 corporations 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 and the ability and willingness to pay. Scores indicate credibility and discipline in meeting debt obligations.
The move is part of CBI’s measures to promote credit cards and small loans.
Mahramian said the regulator’s main concern is the interest rate on credit to users of BNPL platforms.
"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," he added.
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."
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.
The consultancy firm Ilia recently published a report on public expectations from banks and credit services, revealing that 83% of the respondents were unhappy with the financial services offered by banks.
Unreasonable and controversial demands from those seeking loans, especially in relation to putting up a collateral, was a key complaint of a large majority against the banks, both private and state-owned.
The report said 15% of borrowers regretted taking bank loans while 64% of the users of innovative lending platforms were satisfied with the service.
According to the report, about 4.5 million people in Iran have used innovative lending solutions, including BNPLs.
Main Providers of BNPL Services
Snapp Pay, DigiPay, WePod and AzKiPay are 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 fiscal year that ended in March 2022.
Snapp!, a major Iranian tech firm, claimed in its annual report that it made the BNPL service available to 4 million users last year.
According to a recent report, "Poverty in the Access to Financial Services" by the Ministry of Cooperatives, Labor and Social Welfare’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 by 15% to June 20. The Central Bank of Iran earlier said that it supports the growth of BNPL services because of its positive impact on the economy.
The World Banks' Global Findex 2021 shows that 61% of Iranians had borrowed money and 25% had borrowed from formal financial institutions. The largest portion of borrowers had borrowed from friends and family – 40% of the total population of ages above 15.
It showed some 84% of Iranians had made digital payments and nearly 7% had a credit card in 2021, 2 percentage points less than in 2017. An estimated 83% owned debit cards.
