Iran is engaging in a new round of cooperation with the Bank of Islamic Development (BID), with many investment projects between Iran’s private sector and BID already underway and several more to come in the following months. The intention to establish an $80 million credit line for Iran’s private sector is the fruit of negotiations between the investment departments of BID and Iran’s Ministry of Economy. Furthermore, two separate credit lines –with a 5% interest rate– have been setup for Iran’s Banks of Keshavarzi (Agriculture) and Sanat va Madan (Industries and Mines) to be invested in a range of projects. The amounts of these credit lines are liable to rise.

Two groups of experts from BID are currently in Tehran conducting research into granting a $120 million loan for the development of a power plant in Kerman. So far $40 million of this figure has been finalized and will be approved by BID’s board of directors in the coming years. In addition, two other projects –worth $100 million– have been proposed by Iran for the purchase of two aircraft and the expansion of the steel industry. These projects along with requests for funds for the construction of dams in Eastern Azerbaijan and Golestan and establishing a sewerage system in Hamedan are currently under consideration by BID.

Mehdi Karbasian, Deputy Minister of Finance and Economic Affairs, drew attention to BID’s $69.8 million loan for the expansion of Iran’s copper industry, which will be paid presently and will be the first project financed by BID. He recounted the benefits of receiving funding from BID for the private sector as being: First, funds are governed by principles of Islamic contract. Second, the interest rate is reasonable and rarely exceeds 6%. Third, there is a long repayment period of 12 years, where two years are interest-free. And finally, it will be the first step in teaching Iran’s private sector how to effectively utilize international monetary reserves to finance its projects and how to guarantee repayment without relying on government collateral. He explained that Iran is BID’s fourth stakeholder –after Saudi Arabia, Kuwait and Libya– with a permanent representative on its board of directors. Thus, the private sector should not hesitate to turn to BID for funds.

On a different note, Karbasian declared that all Iran’s banks, except the central bank, would be privatized. Since last year the relinquishing of government banks to the private sector has been on the Cabinet’s agenda and the framework for this privatization has been drawn up. The only obstacle now faced by banks is ascertaining the appropriate method of privatization, which will be overcome in the coming days.

In recent years, banking has been at the heart of many controversial debates. Experts have written off the banking system as inefficient and officials have given their nod of approval for reform –via privatization– in this vital section of Iran’s economy.

Mehdi Aliakbar, Managing Director of Iran’s Privatization Organization (IPO), announced that government banks and insurance companies will be seceded to the private sector and IPO is currently conducting research into the project’s viability. Seceding monetary structures has far-reaching implications, therefore we must conduct comprehensive research and cannot pinpoint the exact date of completion as of yet.