According to the report published on the website of the Central Bank of Iran, the lenders’ total outstanding loans stood at 14,264 trillion rials ($103 billion) by the end of ninth months (Dec 2019) of the current fiscal year. An estimated 3,961 trillion rials ($28.7 billion) was given for civil partnership contracts. This accounted for 27.8% of all loans, Financial Tribune reported.
Lenders gave 3,889 trillion rials ($28.1 billion) for installment sale contracts, representing 27.3% of the loans. Partnership loans declined 2.7% compared to figures reported for the end of last fiscal year (March 2019). Lending for installment sale increased 1.2% during the period.
Partnership contracts fund projects in industrial, agricultural and housing sectors and are like a joint venture between the two sides.
An installment sale is a financing arrangement in which the seller allows the buyer to make payments over an extended period. In such a sale, ownership is transferred to the user at the end of the installment period.
Based on CBI figures, loans were granted in the framework of eleven Islamic contracts and Murabaha loans were the third on the priority list of borrowers.
Murabaha loans grew 49.5% over the nine months and amounted to 2,054 trillion rials by Dec 21, accounting for 14.4% of the total lending.
Murabaha is an Islamic financing structure in which an intermediary buys a property with a free and clear title. The intermediary retains ownership of the property until the loan is repaid in full.
Outstanding low-interest Gharz Al-Hasanah loans were 1,044 trillion rials by Dec 21, up 33.1% compared to the end of the last fiscal year.
Direct investment accounted for a meager share of the lending, hardly representing 0.5% of lenders’ portfolio during the period.
Private Banks Improve Lending
As per the CBI report, majority of loans were granted to applicants by non-government banks and credit institutions. Accordingly, private lenders gave 8,825 trillion riails ($64 billion) in loans, up 8.3% compared to the end of the last fiscal year.
Partnership loans accounted for 37.3% of loans given by private lenders followed by installment sale and Murabaha loans.
Commercial banks recorded 15.7% growth in lending during the period, while growth in the loans offered by five state-owned specialized banks was 9.2%
Bank Maskan (main housing lending), Export Development Bank of Iran, Bank of Mine and Industry, Cooperatives Development Bank and Bank Keshavarzi ( main agro bank) are the five specialized banks in Iran.