Governor of the Central Bank of Iran Valiollah Seif said his bank would not cave in to pressure from outsiders or compromise its crackdown on unlicensed credit and financial institutions.
Seif made the remark after some of the credit institutions’ managers intensified their propaganda campaign against CBI, accusing it of “political inclinations” in its fight against them.
“Unfortunately, some are trying to sabotage CBI’s efforts in organizing credit and financial institutions by engaging in politically motivated schemes, but the CBI is determined to stick with its campaign, which is backed by top political and economic authorities,” Seif said. “We will not let them bully us into changing our course.”
The top monetary policymaker added that the CBI has made arrangements with the judiciary and the police to expedite the process of tackling the unauthorized firms, the news website Banker reported.
Credit Companies in the Crosshairs
As the CBI tightens its grip on uncertified credit and financial institutions, convictions run deep on how to effectively confront entities that posed a serious dilemma for monetary officials in recent months.
The mushrooming unlicensed credit and financial institutions gathered unprecedented momentum during the two-term presidency of Mahmoud Ahmadinejad, when the informal money markets became a hotbed for rent-seeking behavior and profitable speculative ventures.
Although there are no official data on the number of financial institutions, there are reportedly 7,000 of them around, 6,000 uncertified.
The CBI has tried all possible strategies in the past—including merging credit institutions with commercial banks or closing them down—to address the issue, but to no avail.
New Initiative
Based on a memorandum of understanding signed between the CBI and the Ministry of Cooperatives, Labor and Social Welfare, 600 credit cooperatives will be authorized to operate in the money market.
According to Deputy Cooperatives Minister Hamid Kalantari, cooperatives will receive the central bank’s license on condition that their financial services are only offered to the cooperatives’ members, and not the general public.
The central bank has agreed with the establishment of credit and financial institutions in the form of public cooperatives to help boost financial activities of small investors.
Kalantari believes the new move would help organize the unregulated money market by channeling the money supply more efficiently.
It could also act as deterrence against the further growth of credit and financial institutions.
The CBI has also approved the license of several credit institutions that met the bank’s requirements, which as an incentive for other similar firms to come under the regulatory watch of the central bank of Iran.
