Economy, Business And Markets

Bank Maskan Ventures Into Structured Finance

Bank Maskan Ventures  Into Structured FinanceBank Maskan Ventures  Into Structured Finance

Bank Maskan is implementing a new financing scheme it calls “structured finance” to help large development projects.

New Towns Development Company, Iran Airport Company, Islamic Republic of Iran Railways and the Construction and Transport Infrastructure Company are among the main beneficiaries, Ministry of Roads and Urban Development website reported.    

Structured finance involves complex financial transactions offered normally by large financial bodies to companies with exceptional financial needs that usually don’t match conventional financial products such as a credit facilities or loans.

Structured finance came to the fore in the financial industry since in the mid-1980s. Collateralized bond obligations (CBOs), collateralized debt obligations (CDOs), syndicated loans and synthetic financial instruments are examples of structured financial instruments.

The banking and finance system is “prepared for participation in infrastructure, housing and urban development projects.” Bank Maskan CEO Mohammad Hashem Botshekan said on the second day of a conference on Investment Opportunities in Iran’s Transport and Urban Development in Tehran on Sunday.

Banks and financial institutions in Iran operate in four ways: granting loans, funding services by issuing bonds and securities, firm commitment, and immunization through derivatives market.”

Elaborating on the banks’ services in the field of firm commitment, he said lenders guarantee bills from issuers who finance railway or port projects.

Botshekan noted that a package has been introduced for financing infrastructure projects and banks and financial institutions can participate in financing construction projects.

“A directive to this effect has been approved by the Cabinet. Financial resources are available in cash, loans received by selling securities and issuing Islamic and other types of bonds,” he said.

 Wide Range of Services

Referring to the law for organizing and supporting the housing market, he said, “In this law several tools have been envisaged, including the setting up of joint investing funds between Iranians and foreign parties. Tools have also been provided for urban retrofitting, the most important of which is foreign investment and participation.”

The CEO divided banking services in Iran into two categories including banking services premised on the monetary market and non-banking services centered on investment and insurance markets.

“Financial services in the housing and infrastructure sectors are offered in two ways: the ‘conventional method’ and ‘comprehensive method’, he said, normal services include loans, raising capital and limited issuance of securities.

Explaining the financing methods, he said, “This is a comprehensive and innovative approach which relies largely on domestic resources in tandem with the present situation.”

Regular financing methods are “used for ordinary services and standardization, while comprehensive packages are for premium customers and complex projects. For both regular services and comprehensive packages different strategies and techniques have been devised.”

Botshekan divided banking services into two categories: product-centered for individuals and solution-centered for corporations and investors.

“As a specialized bank, Bank Maskan provides services like housing savings account which provides subsidized, long-term mortgages to first-time home-buyers and youth savings account. Our bank also provides facilities to corporations and investors in such areas as property management and issuing bonds, the most important of which is the PPP method (Public Private Partnership).”

The key lender has also designed a model according to which places like schools, police stations, clinics and local accesses will be built in the new towns planned across the country.