Banks paid some 1,812 trillion rials ($3.48 billion) in loans in the month to April 22 up 12.7% on the year before.
The Central Bank of Iran said on its website that individual borrowers accounted for 198 trillion rials ($380 million) or 10.9% of the borrowing while businesses accounted for the major share during the month -- 1,614 trillion rials ($3.1 billion) or 89.1%.
Regarding the share of various sectors, CBI data show the industrial and mining sector took 37.4% of the total and services companies 43.5%.
Most loans to business owners were to help meet their working capital needs (81.4%). Nearly 13.8% of the total went for starting businesses while expanding business was the reason given for 3.6% of the loans.
Nearly 48.6% of individuals borrowed to buy goods. Marriage loans, emergency (interest-free) loans and mortgages were the other types of borrowings.
CBI data also showed that 84.3% of payment to industrial and mining units was working capital loans. During the period, banks gave 77.5 trillion rials ($149 million) in social assistance loans to 113,000 low-income applicants largely for youth marriage, childbirth and to those wanting to rent a home.
According to the CBI public relations department, banks accepted applications for childbirth loan worth 4.6 trillion rials ($8.8 million) during the month.
According to way2pay website, Bank Melli Iran accounted for the largest portion of childbirth loans paid during the first month of fiscal year – nearly one-third of the total loans. Bank Refah was next with 19% of the childbirth loans.
Some 44.5 trillion rials ($85.5 million) were marriage loans, up 37% y/y. Marriage loans are interest-free repayable in seven years. Couples can apply up to two years after the pronouncement of their marriage.
Banks gave security deposit loans worth 880 billion rials ($254.9m) to applicants wanting to lease a dwelling place.
Security deposit loans were announced by the government in 2020 in the framework of the coronavirus aid package for the large numbers unable to rent a home due to the unprecedented increase in rents and home prices.
Interest-Free Loans Cause Concern
Banks are obliged to lend in the form of as Qarzol-Hassanah schemes (interest-free microcredit) despite mounting concern about the detrimental impact on the already troubled and oft-censured banking industry.
Subsidized social support loans have further undermined banks’ already overstretched resources and pushed many in a precarious condition.
Prominent economists and senior bankers have censured policy and decision-makers for imposing such heavy burden on banks obliging to keep lending beyond their ability and capacity.
In fiscal 2023-24 banks were ordered 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.
The Majlis Social Commission last year raised the ceiling for marriage loans. Debating the new budget, lawmakers decided to increase the loan by at least 25
Lenders gave 44,485 trillion rials ($84.89 billion) in loans in fiscal March 2022-23 up 45.3% on the year before.
In the last fiscal year (ended March 20), banks gave 1,690 trillion rials ($3.3 billion) in social assistance loans to 1.94 million low-income applicants largely for youth marriage, childbirth and to those wanting to rent a home.
Banks accepted 824,900 applications for childbirth loan worth 330 trillion rials ($647.5 million) last year. Some 1,230 trillion rials ($2.4 billion) were marriage loans to 896,000 applicants, up 55% y/y.
Recently, the CBI Credit Commission agreed to raise the cap on Qarz-ol-Hassanah (interest-free microcredit) loans by 50%.
According to a CBI press release, the ceiling for such microloans is raised to 3 billion rials ($6,200), from 2 billion rials.
This is the third time the regulator has increased interest-free microloans in less than a year. Last time, the Money and Credit Council (MCC), the top banking and monetary decision-making body, raised the ceiling from 500 million rials to 2 billion rials ($4,100).
