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‘Enterprise creation’ acts as a catalyst for strengthening Iran’s economy



Banks undeniably play a pivotal role in financing domestic production and driving economic growth. In that regard, Dr. Abolfazl Najjarzadeh, CEO of Bank Melli Iran (BMI), in his latest exclusive article, has highlighted the importance of revitalizing Iran’s economy, emphasizing the need for Iranian banks to function as dynamic, living mechanisms that actively support economic activities.

“For this to happen, the Iranian banking network must address challenges such as inadequate capital adequacy ratios in some banks, increased overdrafts from the central bank, and growing accumulated losses in others,” part of the article reads.

As mentioned by Najjarzadeh, Iran’s banking system, apart from grappling with the adverse effects of unjust sanctions against the Iranian people, must prepare for changes in the banking industry’s operational environment. These include the adoption of artificial intelligence in banking, asset tokenization, and offering banking products and services through blockchain platforms.

Effectively addressing these challenges and transformations can pave the way for Iran’s economic revival and prosperity, leveraging the banking network to finance enterprises and households. Achieving this vision hinges on banks functioning as vibrant mechanisms serving “enterprise creation” to foster Iran’s economic growth.

“Alongside grappling with the effects of the unjust sanctions imposed on the Iranian people, our country’s banking network must prepare to face changes in the operating environment of the banking industry, such as the application of artificial intelligence in banks, tokenization of assets, and the provision of banking products and services on blockchain platforms,” Najjarzadeh wrote.

“Effectively addressing these challenges and transformations can pave the way for the revitalization and flourishing of Iran’s economy, relying on the financing of enterprises and households by the country’s banking network. To achieve this vision, we need, above all, for banks to function as living mechanisms serving ‘enterprise creation’ to stimulate and grow Iran’s economy.”

Elsewhere in his article the CEO urged the need for further changes to keep up with evolving innovation and technology, and the emergence of new business models in the baking industry. “The slow pace of adaptation and resistance to change have deprived banks of understanding market developments and maintaining meaningful connections with customers. Banks now find themselves at the final juncture of competition with digital rivals and must decide how to overcome the remaining adaptation challenges.”

“At Bank Melli Iran, we have recognized this shift and prioritized agility as one of the bank’s core strategies. As part of this agility initiative, we have pursued the divestment of Bank Melli Iran’s stakes in enterprises and companies as an effective operational solution. Since the beginning of the Persian calendar year 1402 (March 2023), this approach has led to the bank’s exit from managing eight affiliated enterprises valued at 350 trillion rials. We are determined to continue this path and fully exit enterprise ownership, thereby freeing up the bank’s resources and assets to finance production and support national development projects.”

Najjarzadeh has also explored various factors and elements in detail related to the banking system’s role in driving Iran’s economy. Key excerpts from his analysis are provided below:

Banks as drivers of economic growth

The ability to create money is an exclusive characteristic of banks compared to other economic entities. Furthermore, their primary inherent advantage is accepting debt as a medium of exchange. This exclusivity and advantage obligate banks to finance enterprises and households to promote a society’s economic growth and prosperity.

By extending credit, banks facilitate economic transactions among households and businesses, enabling income transfer across various economic sectors. Financing and facilitating monetary exchanges are key value propositions of banks, with “enterprise creation” emerging as a significant outcome of their financing role.

An Iranian bank with a dynamic mechanism, alongside adapting to changes in the banking industry, must also respond actively to customer needs. It should position itself as a financial ally for economic enterprises, fulfilling their requirements and protecting their interests.

Banks must exit enterprise ownership and cease competing with private businesses in other markets. Divesting their enterprise-related holdings to the public and genuine private sectors will enhance production efficiency, optimize asset productivity, and improve the economy overall.

Exiting enterprise management will also improve credit access for other businesses, as banks will no longer face conflicts of interest when allocating credit to affiliated versus non-affiliated enterprises. This transition will revitalize business models, accelerate the sale of surplus assets, and reform banks’ attitudes toward addressing loan repayments and debt recovery.

 Dynamic banks for economic advancement

A bank operating as a dynamic mechanism must prioritize its credit health and vibrancy in financing and driving economic growth over merely rebuilding competitive advantages.

To revitalize Iran’s economy, banks should unlock resources tied up in assets, properties, and enterprises by reallocating them to bolster their capital adequacy ratios and fund projects that stimulate production and national development. Properly playing their intermediary role, banks should diversify financing processes using financial instruments and establish financial entities such as “project funds” to support development and innovation.

Banks committed to a vision for the future must build institutions that function like living mechanisms in the banking industry. Drawing inspiration from natural systems for innovation and problem-solving, these banks can harness artificial intelligence to strengthen customer engagement and adapt to changes. Banks that utilize their data and analytical capabilities dynamically can respond to diverse customer needs and design products beyond traditional banking services. This will enable them to compete effectively with technology-driven rivals such as fintech companies.

Customers trust banks to safeguard their money but often do not view them as financial partners in managing their assets. Changing this perception requires dynamic banks that align their interests with customers. For instance, instead of holding overdue mortgage debts, banks could negotiate repayment options with borrowers. Similarly, analyzing customer behavior regarding investment deposits can lead banks to suggest tailored investment opportunities, fostering a win-win relationship for both parties.

Enhancing customer relations

To improve customer relations, banks should leverage accurate data to gain accurate insights into their clients and develop cohesive communication programs through digital channels, offering custom-made financial advice and solutions. Banks must evolve into proactive advisors, aligning their services with customer preferences and needs.

For example, Bank Melli Iran has taken steps to adopt a dynamic role in financing various sectors of the economy, from households to enterprises. Initiatives such as the “Kindness Plan” provide low-interest loans to support families, while other schemes offer financing for small businesses and trades. Additionally, Bank Melli is exploring crowdfunding, financial supply chain management (SCF), and developing a “beyond banking” ecosystem to cater to customer needs with agility and dynamism.

Banking amid economic and technological change

The evolving economic landscape and rising expectations demand that banks shift their business models. Factors such as the growth of the creative economy, the emergence of digital assets, and platform-based business models are reshaping the banking industry. To remain competitive, banks must integrate themselves into digital ecosystems, offering financial solutions that align with modern lifestyles and customer demands.

Adopting artificial intelligence and digital tools can streamline processes, enhance product offerings, and enable banks to meet the growing demand for personalized services. At the same time, banks must exit non-banking enterprises and focus on enterprise creation, as emphasized by Iran’s leadership, national policies, and the Seventh National Development Plan.

Bank Melli Iran, along with the broader banking network, is committed to divesting its non-banking holdings and supporting private enterprise creation, bolstering Iran’s economy. For banks to succeed as dynamic mechanisms serving Iran’s economic growth, policymakers must support transformative measures that enable them to achieve this vital role.



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