How corruption and cronyism in the banking sector fueled Iran’s protests

Among them was Hossein Hedayati, a business mogul and former Revolutionary Guard member, whose rapid rise was so remarkable that websites have speculated on the sources of his sudden fortune. The document released by lawmakers showed Mr Hedayati owed $ 285 million, and on a TV show about the loan, another lawmaker, Mohammad Hassannejad, accused Mr Hedayati of using a series of shell companies to tip over. loans and hide its role.

Mr. Hedayati logged into the program, coughing in rage; he denied having borrowed from Sarmayeh and threatened to “sue everyone”, but has yet to follow through on his threat.

After the Iranian revolution of 1979, the new Islamic Republic first nationalized all banks, among other industries. He also created a variety of semi-official holding companies controlled by the Supreme Leader, senior clergymen or senior military commanders. Over the years, many companies have grown into sprawling conglomerates with major roles even in the supposedly private economy.

Clerics controlled religious foundations, called bonyads, which bought up business enterprises. The largest of them, headed by the supreme leader, now represents “15 to 20%” of the Iranian economy, according to an estimate by Hooshang Amirahmadi, an economist at Rutgers University who studies Iran. The elite Revolutionary Guard Corps controls a separate business empire.

All semi-official holding companies have major advantages over private companies in terms of favorable access to capital, tax exemptions and political relations. And most or all of them have been plagued with accusations of inefficiency and mismanagement, in addition to insider trading and other forms of corruption.

Government reformers took steps to open up the banking sector in the late 1990s and early 2000s, first by allowing religious foundations to set up loosely regulated savings and loans, apparently to serve people. poor. The opening of private banks or the sale of shares in state banks soon followed.

But under a conservative president, Mahmoud Ahmadinejad, came to power in 2005, semi-official bodies controlled by clerics, the Revolutionary Guards or their allies dominated the newly private financial sector. An intern to study produced in 2013 showed that semi-official public bodies owned seven of the 17 private banks. Among them, the Revolutionary Guards controlled at least two, while the army, police, Tehran municipality and a giant religious foundation close to the Guardians controlled the rest.

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