Economy, Business And Markets

Support for Establishing More Development Banks

Support for Establishing More Development Banks Support for Establishing More Development Banks

Minister of Economic Affairs and Finance Ali Tayyebnia said establishing more development banks can be a boon for Iran’s business environment since the main task of such banks is to finance both state and private projects.

“The government plans to adopt appropriate policies, execute effective strategies and create entities such as development banks to help increase investment,” ISNA quoted the minister as saying during an address to a conference held in Tehran on Tuesday on the role of development banks in economic development and growth.

Development banks can help the economy achieve higher growth and remain stable at the time of recession while prioritizing non-state businesses, funding small- and middle-sized enterprises, and support long-term investment projects to improve infrastructure, he said.

Tayyebnia rejected the claim that such banks are only looking for profit.

“Their main mission is to maximize efficiency,” he added.

“Providing 34% of the total loans given by the banking system, development banks hold 16% of deposits and 20% of the nominal’ capital.”

The minister highlighted that based on Resistance Economy—a set of guidelines introduced by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei—wealth creation is the incumbent administration’s top priority.

“The government has come up with plans to improve banks’ capital adequacy ratio, which is the ratio of a bank’s capital to its risk, helps them quit speculative activities, sells excess assets to raise capital, raises fund for less developed areas and financially supports non-oil exports and agriculture projects through National Development Fund of Iran.”

He pointed to eight comprehensive plans envisaged to reach the set goals, including the tax master plan, a scheme to regulate the financing system and the banking reform plan in which the development banks’ lending instructions are explained.

The minister backed the policy adopted over the past two years to curb inflation, which is now hovering at 15%, arguing that low inflation is a prerequisite to ensure market stability and bring economic development in the long run.

Ali Ashraf Afkhami, CEO of Bank of Industry and Mine, announced in the conference that the country’s five development banks managed to lend 1.94 quadrillion rials ($67 billion at official exchange rate) over the last Iranian year (ended March 20).

“However, the amount of loans provided by 12 state and private banks reached $5.75 quadrillion rials ($200 billion) during the same time,” he said without identifying the 12 banks.

“The total capital of the development banks is $3.5 billion, which is one-fifth of the capital held by the 12 banks,” he added, urging authorities to help development banks increase their capital.