The Islamic bond market in Iran was first kick-started in 2011, with Mahan Air’s issuance of ijara sukuk on the over-the-counter Iran Fara Bourse (IFB) to finance its purchase of an Airbus passenger jet. Though President Hassan Rouhani’s administration sees the shifting of financing to the capital market as a way to ease the burden on cash-stricken local banks, things have not turned out as expected. The government, municipalities and state companies are now the largest issuers of debt on Iranian exchanges. Indeed, at present, 88% of the 450 trillion rials ($13.8 billion) of outstanding debt on securities markets is issued by state actors.
Official data indicate that private firms merely account for 10% of overall financing on debt markets, while the rest goes to state organizations and companies. Alireza Tavakoli Kashi, director of modern financial instruments at IFB, told leading business weekly Tejarat-e Farda in November that high financing costs is one of the major obstacles in the way of privately run firms raising cash on debt markets. In this vein, he noted that the cost of financing through bonds on IFB is in the region of 21-25%, adding that “for many private companies, this is not affordable.”