Challenges Facing the Credit Card Industry in Iran

In the past few years, we had many execution plans from the government and the Central Bank of Iran to implement credit cards in the country. But what is preventing it to succeed?

It may appear strange but we don’t have credit cards in Iran. There were many plans from the Central Bank of Iran (CBI) to start the credit system but all of them somehow failed. The last credit card plan ordered by CBI was launched on 22 September. Despite the orders of CBI to all the Banks inside the country to launch this plan with full effort, again it didn’t receive that much of a traction. From the official launch date, many banks didn’t even offer the credit cards to customers due to the fact that the instructions from CBI weren’t clear enough to implement this plan.

The original plan was supposed to bring 10, 30 and 50 million Tomans (2.8, 8.5, 14.2 thousand dollars) credit cards to Iranians to give them more purchasing power as a way out of the economic recession to support the national production. According to some banks, if a person wants the 10 million Tomans credit card, that person should provide the bank with certified payroll deduction of his/her and another person as a sponsor with certified payroll deduction as well to secure the repayment. And this is just for the 10 million Tomans credit card, if a person applies for the 30 or 50 million Tomans credit card, apart from the two certified payroll deductions, he/she should pledge a property to secure the repayments as well. Another problem with these credit cards was that people would use these credit cards to cash out the money from merchants. These types of problems occur due to the fact that there was no prior education on how to use credit cards.

CBI has started the credit system as a substitute to small loans since they have plans not to offer these kinds of loans in the near future. Another major problem with these credit cards is that people are not used to buying their daily needs using credit cards, not to mention that they have to pay the interest even if they repay under a month.