The issue of financial and credit institutions is not a problem of yesterday or today. This dilemma has roots in the years of the 1990s when the Ministry of Cooperatives granted licenses to applicants to establish credit cooperatives to provide limited financial and monetary services to their members. This was similar to an ancient tradition that operated under the name of 'Qarz al-Hasna funds' throughout Iran. As long as these funds and credit cooperatives were committed to providing simple services within the limits of their members, there was not much of a problem. However, at some point, the activities of these financial and credit institutions or Qarz al-Hasna funds no longer aligned with their initial objectives. They gradually began to invest in various sectors, pay interest on deposits, and provide financial services to individuals outside their member base, a practice known as 'money creation.' Banks must have a license from the Central Bank and accept its regulations. According to Tahmasb Mazaheri, the former head of the Central Bank, these financial institutions and credit cooperatives received 'kindnesses' during Mahmoud Ahmadinejad's presidency.
The Roots of Financial Institutions' Problems Date Back to the 1990s
The article discusses the historical roots of the problems faced by financial institutions in Iran, tracing them back to the 1990s when credit cooperatives were established. It highlights how these institutions deviated from their original purpose and began engaging in practices that contributed to financial instability. This issue is significant as it reflects broader systemic problems within Iran's financial sector.
👥 Key Players
📰 What Happened
The article outlines how Iran's financial institutions have faced ongoing problems since the 1990s due to their deviation from original purposes. Credit cooperatives began engaging in risky financial practices, leading to instability in the financial sector.
- Credit cooperatives were initially established to provide limited financial services to members.
- These institutions began to operate outside their intended scope, contributing to financial instability.
💡 Why It Matters
📚 Background
Iran's financial institutions have a complex history, with roots in cooperative lending systems that have evolved into problematic entities. Understanding this evolution is key to grasping current economic challenges.
🏷️ Entities Mentioned
Translated from the original and edited for English readers. View original source →
Translation confidence: 85%