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Bank Refah Reaping the Rewards of Excellence
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Mohammad Taghi Jamalian, Managing Director of Bank Refah |
Bank Refah is one of the
commercial banks of Iran, which has greatly enhanced its activities during
recent years by relying on four decades of experience in providing banking
services. At present, 96% of the bank’s capital, which amounts to 896 billion
rials, is owned by the Social Security Organization.
Recruitment of educated
manpower in all bank units has been the main priority of Refah Bank during the
recent years, so that, the share of personnel holding university degrees has
raised from 16% in 1998 to about 60% in 2002. This development combined with
reduction in average service age of personnel, has provided the bank with a
good opportunity to use new banking technologies for promoting quality of
services. Bank Refah, as the first successful commercial bank of Iran, managed
to obtain ISO 9001 version 2000 certificate for all its branch operations in
2000 from the DQS Company of Germany.
The bank has managed to find
its deserved place among the Iranian commercial banks by having 1,130 branches
and taking advantage of 9,500 efficient personnel, so that, average growth of
deposits and related facilities stood at about 50% during 1998-2002, which was
respectively 70% and 46% above average growth compared to other commercial
banks in the country. Average annual growth of net profits of Bank Refah
during the said years also topped 300%, which was about threefold the average
growth of that index among other commercial banks.
Bank Refah has been
effectively participating in developing the capital market in the country
during the recent years through increasing volume of operations of its agency
at Tehran Stock Exchange, on the one hand, and making possible stock dealings
in provincial centers, on the other.
Methods Used
for Developing Monetary and Capital Markets:
Monetary market
is concerned with creating and dealing money and providing short-term finance,
which is manifested in the country’s banking system. The capital market, on
the other hand, is concerned with long-term finance which is manifested in the
stock exchange. The common goal of both markets is procuring financial
resources needed by investors. Today, capital and monetary markets have been
so intermingled that nobody can make a clear demarcation between them. Some
financial instruments are of a short-term nature but are dealt in the capital
market. On the contrary, banks are responsible for some financial instruments
that are long-term (such as housing loans). Therefore, the monetary and
capital markets supplement each other and many of their capacities take shape
and are completed as a result of interactions between the two markets.
Some of those interactions
between monetary and capital markets could be discussed in three following
domains:
1.
Facilitating Interactions:
The agency of banks
currently accounts for a considerable amount of stock dealing and capital
market trading and is considered a major stock supplier in the stock market.
Therefore, banks can play a great role in facilitating operations and
improving turnover of transactions in the capital market as well as attracting
capital. Banks can also establish public access to the capital market through
their widespread network and by adopting appropriate policies and establishing
direct interaction between applicants and the stock market.
Providing needed
infrastructures for the establishment of electronic banking and, in its broad
sense, the e-commerce network in the country would greatly facilitate the
process of transactions and money transfer. Also, establishment of electronic
banking will pave the way for linking domestic monetary and capital markets to
international financial institutions and would make possible mutual investment
in domestic and foreign capital markets while paving the way for international
activities by the country’s foreign exchange market.
Naturally, the presence of
an advanced banking system would make the practical the use of new financial
instruments for barter and settlement of securities transactions as well as
issuing needed guarantees in the capital market.
2.
Developing Interactions:
The concept of usury-free
banking requires that most financial resources of banks should be used in
partnership contracts and, therefore, usury-free banking operations act
similar to the capital market for recruitment and mobilization of resources.
The natural result is that both deposits and most granted facilities would be
tradable as capital. As a consequence, a large part of financial assets of
banks that stem from their deposits could be traded on the stock exchange.
Therefore, in view of the high volume of deposits in domestic banks as
compared to the total value of stocks at the capital market, the securities
that are tradable at the stock exchange could be issued and transacted at a
floating rate by establishing needed mechanisms.
Diversity of deposited
instruments in terms of maturity, guarantee and commitment (government, bank
or insurance), public and private plans and the like, would lead to the
expansion and development of the capital market, on the one hand, and would
make it possible for banks to rely more on programmable deposited resources,
on the other.
Securities supported by
assets are other instruments that have been in use by capital markets for more
than three decades. On this basis and given the nature of contracts signed for
granting facilities in a usury-free banking system (partnership or ownership)
one can define a wide range of various kinds of financial assets supported by
various bank-granted facilities including civil participation bonds, legal
participation bonds, direct investments, installment sales instruments,
hire-purchase instruments and so on. In this way, we can both create new
instruments for financing banks to enable them to grant new facilities
(without breaching monetary regulations or changing monetary variables
including expansion of money basis) and manage banking risks in a better way.
On the other hand, they can
lead to valuable developments in terms of diversifying financial instruments
at the capital market (other bank assets including guarantees, underwriting,
etc. can be defined in this context). Large-scale governmental policies for
privatizing banks and offering their stocks on the stock exchange could be
another step toward prosperity of the capital market whose realization can
lead to increased competition among banks.
3.
Supportive Interactions:
Banks can play a substantial
role in prosperity of the capital market by short-term financing of companies
active in the capital market through granting facilities to various economic
sectors. Moreover, banks should be able to take action for purchasing stocks
and credit stock transactions through grating facilities, so that stocks of
companies that have been more active in the bourse could be tradable within
the framework of credit purchase. Implementation of this system would increase
demand for stocks in the market.
Since banks enjoy the needed
specialties for assessing various economic projects and familiarity with
capital market mechanisms, to promote specialized management of investments in
the stock exchange, they can increase productivity of the capital market and
reduce investment risk through specialistic companies by presenting
consultancy services.
The reciprocal effect of
capital market and banking system would pave the way for comparing output and
risk levels in the capital and monetary markets. In other words, such indexes
as interbank profit rate, profit rate of bank deposits and interest rate on
facilities are good indexes for evaluating performance of the capital market.
On the other hand, indexes of the capital market can be used for evaluating
efficiency of the monetary market.
On the whole, it seems that
development of financial markets including monetary and capital markets
requires use of new financial instruments in each of the abovementioned
markets as well as establishing needed mechanisms to facilitate transactions
between the two markets. To realize this goal, it would be necessary for
experts on monetary and capital markets to identify capabilities and
capacities for developing interactions of the said markets through attention
to policies and goals of each sector, learning from experiences of other
countries and endeavoring to institutionalize them.
Attention to the role of
other financial institutions including insurance companies, investment
companies, finance and credit institutes and similar institutions could pave
the way for a balanced and all-out development of domestic financial
institutions within the framework of the economic objectives of the country. |
