Economy, Business And Markets

Of Patronage and Profit: Banks’ Sponsorship of Sports Clubs

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Of Patronage and Profit: Banks’ Sponsorship of Sports Clubs
Of Patronage and Profit: Banks’ Sponsorship of Sports Clubs

This week Iran’s Volleyball Super League’s final match was held between Sarmayeh Bank’s club vs. Paykan, with the former grabbing the title.

Sarmayeh’s victory, however, raised doubts about the recent ruling that bars banks from investing in non-banking sectors, including sponsorship of sports teams.  

The decree—issued by the Central Bank of Iran in April—has not yet removed the heavy shadow of banks, as they are yet to relinquish their ownership of clubs or sponsorship as a part of their “social responsibility”.

Currently bank-owned sports clubs are doing fairly well at a time when a majority of sports clubs are struggling both in terms of performance and finances. Sarmayeh Bank, for instance, started a team from scratch—recruiting two-thirds of its players from the national team and hiring a top coach to turn the team into the only serious rival for Peykan, a team owned by Iran Khodro, the country’s biggest automaker.

Another example is Foulad Khouzestan, affiliated to Bank Melli Iran, which is a top team in Iran’s Pro Football League. While, BMI was initially reluctant to keep the team, its extraordinary performance in the Pro League, made the bankers change their mind.   

Even teams patronized by unauthorized credit institutions have achieved significant success. The volleyball club owned by the now-defunct Mizan credit institution had a good performance during its shortlived presence in the Iranian Volleyball Super League.

The club was handed over to Samen Al-Hujaj, following Mizan’s insolvency but Samen Al-Hujaj met the same fate as it went bankrupt. The club is still playing in the league while facing an uncertain future.

At the same time, the government has been struggling to privatize the country’s two main football clubs, Esteghlal Tehran FC and Persepolis Tehran FC.

Both Tehran-based clubs are highly in debt with no solid source of revenue to make them attractive for buyers. Banks, however, have shown occasional interest in acquiring them. Although some wealthy individuals made bids for these clubs, they are deemed too crucial by authorities to be entrusted to individual investors.

  Stellar Background

Banks’ presence in sports arenas is not a new phenomenon. Bank Melli Iran ran a football club for 56 years. By putting the focus on young talent, the club managed to introduce stars like Mehdi Mahdavikia. However, in 1991, the bank’s officials decided to sell the club citing “infeasibility” of such activities, although the main reason is said to be their lack of interest.

Tejarat Bank also had a football club for five years (1989-90) that was sold on similar grounds. However, during its brief stint, Tejarat Bank FC introduced world-famous footballers like Ali Daei, Afshin Peyrovani and Yahya Golmohammadi.

A new generation of lenders—Bank Pasargad and Saman Bank being the most notable—has taken a more prudent approach in sponsoring sports clubs and national teams instead of directly investing in them.

Saman Bank, a private bank, had an undeniably significant role in promoting volleyball and turning it into a popular national sport, funding the national team all the way to FIVB Volleyball World League.

Bank Pasargad Iran, another prominent private lender, also supported the national football team in World Cup 2014, freeing football officials from their financial worries.

However, such sponsorships cannot merely be branded as ‘’social responsibility’’, since banks hugely benefit from the associated publicity.   

Bank Pasargad has recently launched a plan to invest Persepolis fans’ money into steel industry and use the revenues to help the club.

Banks, as the most powerful institutions in the country’s economy, seem to be capable of increasing the revenues of sports clubs and their own.

Some take a dim view of this, saying they create monopolies and hinder other teams from succeeding.  Others—mostly those directly involved in the clubs’ affairs—think banks could promote sports, provided it is not tainted by managers’ caprices.

However, a look at banks’ history in sports shows that decisions have been mostly made based on the personal interest of top bankers, whereas consistent plans, especially those aimed at young athletes, are more likely to bear fruit both for bankers and the country’s sports sector.  

Regulations need to be modified so that banks can strike a balance between speculative, non-banking operations and truly constructive initiatives like their support for the country’s sports, which has proved to be more of a blessing than a curse.