Will Iran experience a financial revolution following the lift of nuclear sanctions?


One of the purposes of the fintech revolution is financial inclusion – providing financial services to the underbanked segments in both mature and emerging markets. This is often synonymous with retail banking for the developing world where only 41 percent have a bank account. But there are vast opportunities for both incumbents and fintech startups every step of the way when targeting various underbanked segments.Ffrom targeting the SME market through use of blockchain  to exploring opportunities created by political changes. The lift of Iran sanctions after the nuclear deal is one of those opportunities.

Iranian banks make up the world’s largest islamic banking system with $482 billion in assets under management. But the banks have accumulated non-performing loans at the risk of not being repaid in the billions. The banking industry has also been burdened by high-profile embezzlement scandals, and is ranked as the highest risk country in money laundering/terrorism financing. In addition the countries banks were banished from SWIFT in 2012 because of nuclear sanctions, terminating transactions worth $35 billion to/from Europe alone.

With a population of nearly 80 million, where 70% is below 35 years and a smart phone penetration predicted to reach 50% by 2016 there is a big potential to improve and reinvent the financial services industry.

With 4 to 5 million Iranian expats worldwide, inbound remittances revenues alone amount to $1,4 billion according to the World Bank. The widespread use of Hawala networks for remittances makes this amount difficult to track, and some claim that the total amount is four times the World bank estimate. The lifted sanctions could also boost trade finance revenues, as well as give foreign investors access to the Teheran Stock Exchange and direct investments targeting 80 million potential customers, $35 trillion worth of petroleum reserves and deep infrastructure needs. Iran has already implemented a national interbank payments system, Shetab which is enabled for credit and debit cards, e-commerce and mobile payments as well as Satna for RTGS for high value payments.

These are all examples of the possibilities related to traditional financial services, but the potential should could might as well include services live sharia-compliant P2P-lending.

As a result European, Chinese and Indian banks are exploring the potential of entering the Iranian market. But there are still major obstacles along the way. Banks operating in Iran need to regain access to the SWIFT messaging network, a process predicted to take several months subsequent of the end of sanctions. In addition it is imperative that the Central Bank of Iran meets anti-money laundering standards in order to create a regulatory system that  ensures the commitment to stay compliant to international standards.

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