Iranian Bank Lending Continues to Rise

Iranian bank lending portfolio has doubled over the past four years. 

According to the latest report published on CBI’s official website, the total amount of loans in 2012 stood at 1,956 trillion rials ($51 billion), climbing significantly for the next three years to reach 4,173 trillion rials ($109 billion). 

By the end of the 10th month of the Iranian fiscal year on Jan. 19, banks had offered a total of 7,097,685 loans to all sectors of the economy, the CBI report said.

The value of loans reached 4,270 trillion rials ($120 billion), marking an annual growth of 43.4%, which shows a threefold increase compared with the same period of four years ago.

Part of the reason for the meteoric rise in bank lending could be ascribed to the scheme for restructuring a portion of bad loans by lenders. 

The report said working capital loans comprise the lion’s share of all lending. 

An analysis of the report reveals that in the aforementioned period, the share of working capital loans for all sectors of the economy stood at 2.72 quadrillion rials ($71 billion), which account for 63.7% of all loans during the period. 

The figure shows a 68.52% increase in the volume of working capital loans compared with the corresponding period of last year.

As the report indicates, the share of working capital loans to stimulate industries and mines was 1,000 trillion rials ($30.8 billion), which equal 37% of all the credits extended to meet the working capital needs of businesses. 

The services sector was the runner-up, grabbing 934 trillion rials ($28 billion), or 34% of the entire working capital loans.

 Share of Sectors 

A sector-by-sector assessment, however, shows the services sector took the largest share of the total loans. The figure stood at 1,700 trillion rials ($52 billion), which account for 43% of the total loans in the first 10 month of current Iranian year. 

Industries and mines also had a fair share with the amount of this sector’s loans standing at 1,240 trillion rials ($37 billion), accounting for 31% of the total amount.

The sector received 1,240 trillion rials ($37 billion) in capital with 81% of it in the form of working capital loans. This highlights the urgency of the sector in bankrolling its projects and the favor shown by the banking system to the sector.

The agriculture sector pocketed 1,427,035 loans, but the amount only reached 357 trillion rials ($11 billion), or 9% of the total, whereas the 261,842 loans extended to industries and mines were about four times that of the agriculture sector. 

In terms of quantity, the services sector scored the highest number with 3,526,949 loans, which are almost half of all the loans doled out during the period.

The amount of loans extended to the housing sector was relatively low in comparison with services or industries and mines sector, which is reflective of the painful recession plaguing this key sector.