Economy, Business And Markets

Development Banks Foster Economic Growth

Development Banks Foster Economic GrowthDevelopment Banks Foster Economic Growth

Economic woes and lack of liquidity have driven commercial banks into non-banking operations, said Teymour Rahmani, a Tehran-based academic. But he added that banks have gone far in doing speculative activities.

“Commercial banks support profitable projects only and it would not be important for them if they provide financing for infrastructure or other projects. They only seek their profit and it’s natural for a commercial bank,” he said, as reported by Eghtesad News website this week.

However, the academic said, the main role of development banks is to contribute to economic growth through participation in development projects.

“For a development-oriented bank, gain and loss are secondary. In some cases, even the final aim is to help and not gain. That is why it is necessary to highlight the role of development banks and define their functions,” he said.

Development banks expedite the completion of industrial projects and foster social and economic development.

Unfortunately, in Iran, the concept of development banks has faded away and they are perceived only as a source of finance, Rahmani noted.

He further said Bank Maskan (Housing Bank) was initially established as a specialized development bank but it later turned into a commercial one with all the usual practices that a commercial bank needs to carry out to make a profit.

“It’s necessary for the bank to change course and act as a development bank for the housing sector now,” he stated.

“Then Bank Maskan can invest in projects that are not only technically and economically feasible but also contribute socially as any development in the housing sector could eventually foster economic growth and generate employment,” he said.