Economy, Business And Markets
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Fresh Call for a Business-Friendly Setting

Fresh Call for a Business-Friendly Setting Fresh Call for a Business-Friendly Setting

Lack of supervision by the Central Bank of Iran over the uncertified financial institutions is the main reason behind the apparent lack of public trust in lending institutions, a faculty member at Tehran’s Shahid Beheshti University said.

“Financial and credit institutions should operate within the CBI’s regulatory framework whose credibility is based on mutual trust between depositors and lenders”, Abbas Hoshi told the eghtesadnews website on Sunday.

“Since the value of deposits usually exceeds the quasi-lenders’ capital, it is a must for the government to keep a close watch on this sector of the economy and bring it under direct CBI supervision.”  

He explained that banks, as financial intermediaries, should guarantee the repayment of their loans by meticulously evaluating the credibility of borrowers. If this is not done “Money will not return to the financial system and depositors will regard banks with suspicion and distrust, resulting in liquidity problems for banks.”

Diminishing public trust in banks is a “very dangerous threat to a country’s monetary system; the government must take action to maintain and safeguard the trust in the financial system”, he said.  

On the unfair competition in the banking industry, he said Qarzol-Hasane (microcredit and interest-free loans) is suitable for providing financial support; however, when Qarzol-Hasane institutions are run as financial and credit companies and start attracting deposits and making profit, the depositors expect bigger profit margins and the demand for loans exceeds deposits, pushing the banking sector into chaos.

Asking the government to walk the talk, the university instructor said, “The government should, once and for all, get rid of the unlicensed financial and credit institutions, instead of repeatedly issuing (hollow) verbal warnings to raise public awareness.”

CBI officials say 7,000 unauthorized credit institutions operate across the country and are a major challenge to the government’s efforts to organize the money market.   

Financialtribune.com