The Iranian Parliament (Majlis) even stepped further and passed legislation of development banks’ frameworks. However, regardless of claims, it would be helpful to assess the feasibility of the implementation of this plan.
What Is A Development Bank?
Since the 1950s, development banks have been established as national or regional financial institutions designed to provide medium- and long-term capital for assistance in industrial sectors as well as agriculture in poor countries. They may give loans, engage in productive investment, often accompanied by technical assistance for specific national or regional projects. The large regional development banks include the Inter-American Development Bank, established in 1959; the Asian Development Bank, which began operations in 1966; and the African Development Bank, established in 1964. These banks also make efforts to promote investment opportunities.
Development banks played an essential positive role in poor and undeveloped countries to improve their industries. Therefore, they received a warm welcome across the globe to aid economic development plans. Notably, more than 500 development banks and institutions are running across the world to provide financial resources and technical advisory for private and non-private sectors. This kind of banks direct investments according to the countries’ economic policies and financial infrastructures. They also assist the poor and undeveloped nations to advance their industrial, agricultural, and cooperative sectors.
Development Banks in Iran
Today, four development banks are running various branches across Iran. They include Sanaat va Maadan bank, for supporting the industrial and mineral sectors; Keshavarzi bank, for supporting agricultural sectors; Maskan bank, for supporting home building sectors; Tose’eh Saderat, for supporting exportation sectors. Whatever the effectiveness of these banks in Iran’s corrupt system is under a question mark.
It is worth noting that Iran’s industrial and agricultural sectors are in heavy bankruptcy. Exports approached zero and the government is experiencing heavy unprecedented sanctions that no other country has been subject to. There is also no sign of ceasing sanctions regarding the costly and adventurous foreign policies of the Ayatollahs. In addition, there is no optimistic sign in the housing sector, which has lost its credibility after recent earthquakes.
Approval of the “Islamic Banking Plan” by the Parliament
On 17 December, members of Majles passed frameworks of the Islamic banking plan, which also includes development banks. Of course, this is not the Iranian government’s first try to fix its crumbling banking system through this kind of bank. It is worth reminding that the Qarz Al-Hasaneh Mehr bank was established during the tenure of former president Mahmoud Ahmadinejad. However, Qarz Al-Hasaneh Mehr failed to achieve its specified goals.
Observers say that principlists seem to be supporting this plan. A while ago, the supreme leader Ali Khamenei spoke about “the administration of revolutionary and Hezbollah youth.” Earlier, Khamenei time and again remarked about “Jihadist management.” Therefore, banks and the banking system are supposed to be sacrificed by Khamenei’s proponents.
“Now, they [Khamenei’s supporters] have mixed the law of the Central Bank and the law of monetary and banking system and are looking for establishing a development bank. This is taking place while we had many banks in this sector like Tose’eh Keshaverzi, Sanaat va Maadan, and Saderat va Taavon. Therefore, there is no necessity for establishing this bank and it can do nothing,” former chief of the Institute of monetary and banking Ahmad Mojtahed said about the approval of establishing development bank at the Majlis session on December 17.
Mojtahed also continued that the development bank “reduces the power of the Central Bank. So, it is not welcome by the Central Bank of Tose’eh Jomhuri Eslami, which is supported by the Central Bank.” He also warned, “[the plan] may result in raising the liquidity in the society.”
The bankruptcy of Existing Banks
For a long time, analysts are speaking about the bankruptcy of the banking system under the Ayatollahs’ corrupt rule. Officials vehemently deny this issue, but the rapid approval of this plan is very strange. In addition, the approval of 200 articles that must be passed by the parliament reveals that the existing banks face an absolute impasse. But the government tries to conceal the scope of this economic crisis by some publicity stunts. Evidence hint that the plan is stillborn.
Manufacturers Have Been Sacrificed by Banks
“Banks of the country take between 30-33 percent interests from manufactures to compensate for some parts of their bankruptcy. This is taking place under the surveillance of the Majlis and its members. The Majlis is controlled by owners of power and wealth,” said economic expert Hossein Raghfar on November 30.
The news of banks’ bankruptcy widely spread among the people, in social media, and in media outlets. “The media outlets ask me about some subjects like if we are compelled, will we block the people’s assets in banks?” the head of the Central Bank of Iran Abdolnasser Hemmati said on December 21.
On the other hand, the approval of development banks is happening concurrently with the confiscation of many factories and leaving many workers unemployment. “Banks absorbed factories and left employers and workers unemployed… accumulate debts, destroyed producers’ properties…” ILNA News Agency published on December 24.