The Political Economy of NPLs in the Iranian Banking System

Batooli, Seyyed Abolhassan; Biabani, Gholamhossein; Jandaghi Ghomi, Mohammad

doi:10.48308/jep.5.1.167

The Political Economy of NPLs in the Iranian Banking System

Document Type : Original Article

Authors

¹ MSc of Political Sciences, Dafoos, and Ph.D. Student, Higher National Defense University, Tehran, Iran.

² Associate Professor, Department of Crime Detection, Comprehensive University of Police Sciences, Tehran, Iran

³ Department of Accounting and Finance, College of Farabi, University of Tehran, Qom, Iran

10.48308/jep.5.1.167

Abstract

The Islamic Republic of Iran has different policies in economic, social, cultural, and international aspects since the Islamic Revolution in 1979. This new political economy has had many socioeconomic challenges for the Iranian people since its emergence. Recently, the government of Iran has focused on the Iranian banking system, especially the problem of a high rate of NPLs, and their relationships with the current socioeconomic problems of Iran. The purpose of this research is to explain the political economy behind the non-performing loans (NPLs) of the Iranian banking system. This research has a qualitative design as a content analysis of Iranian officials’ disclosures by triangulations of the country's leadership, governmental powers, and Iranian economic-politic pundits for 1961-2023. Our findings show that NPLs in the Iranian banking system have five feeding pillars: the government’s anomalies, foreign policies, economic identity, social anomy, and geographic demography of Iran. These pentagon pillars of the political economy increase socioeconomic pressure on Iranian banking systems to spend low-quality lending towards the government’s socioeconomic strategies. However, the political economy significantly disturbs the country’s small markets and fuels social crises. The results provide insights about why Iran doesn’t have a steady economic development yet.

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