IRAN. Bank Melli Iran is maximising its regional strength through an ambitious expansion strategy that extends across the Middle East. Bank Melli Iran is not only the nation's largest bank in terms of assets, it is also expanding its operations regionally with a variety of initiatives streching from Afghanistan in the East to Iraq in the West and Dubai in the Gulf.
Following the establishment earlier this year of Bahrain-based Future Bank, a joint venture with Iran's Bank Saderat and Bahrain's Ahli United Bank, Bank Melli hopes to set up a branch in Baghdad. According to Zafarani Hassan, a Bank Melli board member, a full licence to operate in Iraq has been granted in principle and this would help facilitate trade between the two countries.
Bank Melli is also keen to put together a similar structure in Kabul, which would help facilitate trade between Iran and Afghanistan. Hassan also said in local press reports that Bank Melli plans to set up in Pakistan, Saudi Arabia and Kuwait in addition to its eight existing branches in the UAE. Besides its representation in Europe and Hong Kong, Bank Melli has operations in Muscat in Oman and Baku in Azerbaijan.
The strengthening of Bank-e Melli Iran (the National Bank of Iran) dates back to October 2004 and a move that could signal the end of Iran's state-dominated economic model. As a key component of its strategy, Bank Melli has undertaken a series of steps to raise its customer value. To deliver on its public commitments, the Bank has refined its services by developing the integrated banking system, known as 'Siba' which is now provided through 1,273 branches in Iran. Other major steps included setting up 1,326 VSAT terminals, 481 automated teller (ATM) machines and increasing the use of PIN card and point-of-sale units, particularly at shopping centers and other prime locations.
Last year the Expediency Council gave the green light to privatisation of other major sectors including banking. The Council's move was heavily criticised by Iran's hard-line media which said the initiative threatened the country's economic sovereignty. Nevertheless after about a year of deliberations, the Iranian Deputy Minister of Economic and Financial Affairs, Mehdi Karbassian, confirmed the government's decision to privatise all Iranian banks, but excluding the Bank Melli Iran If fully implemented, this economic initiative will have a major long-term impact not just on Iran's economy, but also on its political system.
"We want to keep at least 35% of the shares of banks which are to be privatised, so that the state can apply its control in the sector," Morteza Nabavi, a member of the Expediency Council said.
Analysts say Iran's inefficient state-owned banking system is a bottle-neck for the country's fledging economy. Iran's supreme leader Ayatollah Ali Khamenei, who has the last word on all state matters, has approved some private control but he has said that a capitalist approach for privatisation in Iran is out of the question.
"Keeping everything in the hands of the state is wrong, but privatisation must be carried out while securing state supervision and sovereignty," he was quoted as saying by Resalat daily. Prior to the 1979 Islamic revolution, all major banks (some 15 units) were privately-owned institutions, excluding the National Bank of Iran (Bank-e Melli Iran) and the Sepah Bank (Bank-e Sepah). As part of the politically motivated economic plan aimed at eliminating big business, the revolutionary regime confiscated all large enterprises, including the private banks, which were subsequently merged into a few super-large government-run banks.
Now in Iran, the rapid take-up of services offered by the few new private-sector banks has illustrated that it is possible to operate profitably within the rigid confines laid down by Islamic law and state controls. However, the private institutions remain small and their room for expansion is constricted by the state-owned banks' domination of the sector.
The authorities will continue to press ahead with efforts to improve the functioning of the stock exchange, both physically and in terms of legislation and regulation. The government will continue to list state-owned assets on the bourse, thereby deepening the market. However, the Tehran bourse, reflecting the wider economy, will remain dominated by the state in the medium term, both in terms of investment and ownership of listed companies. A key part of Bank Melli's regional expansion is expected to come through the Dubai International Financial Centre. Hassan said the company hopes to establish a Bank Melli branch in the DIFC "as soon as possible".
"Our focus is regional," Hassan said, stressing the importance of Dubai and Turkey, where Bank Melli has three branches and key banking links. He added that a branch in Athens is an integral part of Bank Melli's regional network.
Bank Melli, in common with other Iranian banks, is expanding its offshore banking potential on Kish Island along with Qeshm. Future Bank is also planning to set up a branch on Kish to take advantage of the trading opportunities in the Gulf.
Note: Bank Melli operates some 3,061 branches in Iran and 17 offices and subsidiaries abroad, employing 41,102 staff in total. Bank Melli was last year Iran's leading bank in terms of credit facilities, retaining a 32% share of the total lending market for commercial banks.
Compared with other banks, Bank Melli also claims to be the largest provider of public services in areas such as the collection of water, electricity and telephone bills, traffic tickets, building construction levies, pay cheques, money transfers, certified and interbank drafts.
See also: www.bankmeli.com