Banks Eye Credit Card Comeback

EghtesadOnline: Banks have received 100,000 requests for credit cards for which Justice Shares can be used as collateral, an official with the Central Security Depository of Iran (CDSI) said.

News ID: ۷۸۶۸۲۶

09 August 2021

"Since the beginning of the scheme, Bank Melli and Tejarat Bank have prepared the infrastructure for issuing credit cards backed by the so-called Justice Shares. Fifteen other banks have also expressed their readiness to join the scheme," Somayeh Mohammadi, head of the scheme at CDSI was quoted as saying by IBENA.

Justice Shares are shares of government-owned companies that were given free to the six lowest income deciles almost a decade ago. An estimated 49 million Iranians own Justice Shares.

Justice Share portfolios includes 49 state-owned companies in the auto, metal, mining, and agriculture, petrochemical and banking sectors.

Shareholders were not allowed to sell the shares until last May.  Trade in the shares started officially on May 26, with shareholders allowed to place sale orders for 30% of shares in their portfolio in the initial stage.

The main goal of the credit card scheme is to help check possible volatility in the bourse by preventing oversupply of shares.

As per the measure, shareholders are eligible for receiving credit up to 50% of the value of their Justice Shares portfolio.

The government has urged the people to be patient and not rush in selling their shares whose real market value is yet not known.

Replacing Microloans

Iranian banks issue credit cards, debit cards and gift cards, though the first type is a rarity limited to VIPs.

Offering credit cards with easy conditions to a large segment of the population, mostly from the middle and lower strata, could help promote the use of credit cards in Iran.

The Central Bank of Iran says it is working to institutionalize the use of credit cards as a resourceful and accessible alternative to microloans. Banks pay huge amounts in controversial loans to big businesses but small loans are few and far between accounting for a meager part of the total lending.

Past attempts at promoting credit cards failed mainly because of private banks' reluctance to get involved for hitherto unknown reasons.

Data released by Shaparak Company, shows that 266,043 credit cards were used at least once during the month to June 22. This means that credit cards account for a tiny 0.22% of the 119 million active bank (debit) cards.

The number of active credit cards, however, indicates a growth of 125.4% on the month before. Bank Melli Iran, owned by the government, alone had a 34.1% share of active credit cards during the period.