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Can Iran’s private banks make a difference?

The Iranian government will need to enact policies to support private banks for Iran’s private sector to grow in 2014.
An Iranian flag flutters in front of the head office of the Export Development Bank of Iran (EDBI) in Tehran November 9, 2008. REUTERS/Morteza Nikoubazl (IRAN) - RTXAEWW

Experts agree that the Iranian private sector will be the critical element in driving the country’s economy out of its current stagflation. At the same time, private businesses are in dire need of modern and functioning banking and financial services. While still small compared to giant public banks, Iran’s private banks could be the missing link in the country’s business services; however, they need to look for new ways to take advantage of their more dynamic nature. 

Iran started liberalizing its state-dominated banking system in the late 1990s, initially by introducing private “savings and loans” institutions and later allowing the establishment of private banks in 2000. A number of genuinely private banks have been established in the past decade. In addition, shares of formerly state-owned banks such as Tejarat, Mellat and Saderat have been offered on the Tehran Stock Exchange. However, in their management and operation, all the privatized banks are still under government control — a fact that is clearly documented in the appointment of managing directors of these banks by the government. 

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