Collateral-Free Micro Loans to Help Boost Lending: CBI

EghtesadOnline: Banks will no longer demand collateral for loans below 1 billion rials, a deputy with Economy Ministry said.

News ID: ۷۸۷۶۷۸

24 January 2022

Abbas Hosseini, the ministry’s deputy for banking, insurance and state company affairs told state TV that pensioners and salaried employees working for government and private firms can now borrow from banks without the need for a guarantor or collateral.

“Instead of collateral, employees should present their salary certificate for loans up to 500,000 million rials. For loans above this amount they will have to give a check or promissory note,” he was quoted as saying by the IBENA.

The move is in line with plans announced earlier by the Central Bank of Iran to promote lending by banks based on customer credibility rather demanding collateral and/or guarantors when processing loan requests.

Hosseini noted that only salaried staff with good credit rating are eligible for collateral-free loans.

As per an earlier CBI announcement, record of past loans, the borrowers’ check transaction record and even their record in paying traffic fines and utility bills are among the criteria for assessing the eligibility of borrowers.

Under the new framework, banks will limit the access of deadbeat clients even if they put up collateral but failed to settle their debts in a timely manner in the past.

The regulator has devised a platform for online inquiries on their credibility status at mycredit.ir website. The platform has data on 44 million ID numbers and can report on the credibility of 34 million bank customers.

Earlier in the month, Mahboub Sadeqi, the CBI’s head of information department, said effective credibility assessment will help improve access to banking facilities for people with satisfactory credibility.

Reliability status has gained traction because an increasing number of big defaults have led to the emergence of unhealthy and failing banks.

The CBI says in the absence of robust supervision and lack of a centralized data in the past, banks tended to grant loans without proper checks and balances resulting in growing NPLs.

To increase oversight over lending, the CBI said it has designed a system that accesses data banks and allows direct interaction among banks, sharing customer data and enabling lenders to better monitor the eligibility of borrowers.