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Iran’s Islamic banking charms deep pockets

27 October 2015 11:51


Iran has one of the world’s largest Islamic banks. Ninety-two percent of Iranians aged over 15 have a bank account, 75% have a debit card, and 32% have borrowed from a financial institution, according to World Bank data for 2014.

While Iran’s population is similar to that of Turkey, Iranian banks have 40% more branches than Turkish lenders.

Iran’s banking sector, which is Islamic law-compliant, consists of 20 private and eight state-owned banks with an outstanding credit portfolio of $224 billion.

This makes it similar in size to that of South Africa, RenCap analyst Armen Gasparyan said.

Credit penetration in Iran stands at 67% of GDP. It is higher than that in Central and Eastern European countries, Brazil, Russia, or India, and is just below the level in Turkey.

Deposit penetration, at 71% of GDP, is one of the highest in Europe, the Middle East and Africa (EMEA), the analyst said.

Yet most of Iran’s banks are listed nationally, and its banking sector accounts for only about 13% of the country’s total market capitalization and is one of the most fragmented banking markets in the emerging market world.

The average MSCI frontier markets index stands at 47%.

The health of Iran’s banks is challenged by a large share of bad loans and non-core assets. RenCap estimates that these problems would cost about $30 billion to solve.

In June, Renaissance Capital said it was interested in business in Iran and had already started scoping out opportunities in the country.

The top-ranked investment bank said it was evaluating equity trading, deals and analyst coverage for Iran and was informing clients for possible ventures.

The Moscow-based firm is trying to “identify potential investment opportunities in the Iranian market”, the bank’s global head of equities and interim head of research Ben Samuels said.

Global economic analysts project that Iran’s unfettered economy could grow 6-8% annually when the sanctions are totally voided.

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