By Reihaneh Mazaheri, Paris
Iran is falling out of love with the cheque, partly because a vast and rising
number bounce every year. Figures from the Central Bank of Iran show that in the
year to March 2010 only 47 million cheques were written compared to 63 million
in the same period of the previous year and 79 million in 2007-2008.
proportion of cheques bouncing has been rising over the same period to about
10.7 per cent - more than one in ten - in the latest year, from 7.7 per cent in
the previous year and around five per cent in the years up to 2007.
latest year, the dud cheques were worth a staggering 23 billion US dollars, or
five per cent of the total value of 463 billion dollars, according to the
Iranian Central Bank.
economists believe the problem with bad cheques to be the result of the economic
stagnation that the country has been struggling with since 2008.
gross domestic product is estimated by the World Bank to have slid to one per
cent in 2009 from 2.5 per cent in 2008 and 7.8 per cent in 2007. A revival to
2.2 per cent in 2010 is forecast.
Mousavi, the leader of the opposition known as the Green Movement, said such low
growth should only arise when the country is at war.
senior associate at Goldman Sachs in New York and the chief executive of Hoda
International Financial Engineering, Shahin Shayan Arani, warned in an interview
with the economic daily Sarmayeh about the problem more than 18 months ago.
majority of firms cannot fulfil their obligations under these circumstances and
one of the outcomes of it will be an increase in the number of bounced cheques,"
problem with bad cheques is highlighted by a high level of bad debts in the
economy. Official figures say company debts of 40 billion dollars to the Iranian
banking system have been declared in default. The government has twice been
forced to give one-year extensions to over 9,000 concerns to repay overdue debts
to state-owned banks. Other requests for extensions were rejected.
Mazandaran province alone, it was announced in June 2009 that 2,280 of the total
2,873 active concerns had requested extensions on their overdue debts to banks
but the government had agreed only to 56.
problem with bounced cheques is exacerbated by the way they are used in Iran.
Post-dated cheques are common in business transactions and blank but signed
cheques are often used as promissory notes or as a form of guarantee in business
2003, the number of individuals in jail over bounced cheques reached 17,000, the
government decided to reduce its prison costs by changing the law to make it a
civil matter rather than a criminal one. This enabled many of the jailed
offenders to put up collateral or settle with their complainants.
to Ali Akbar Yasaghi, the former head of the Prisons Organisation, the number of
people in prison for bouncing cheques has gone down by 68 per cent. The penalty
is now up to a year in prison depending on the value.
more than one million cases are brought to court because of bounced cheques,"
said the director general of collecting bills in the judicial system, Javad
Tahmasebi. This is one eighth of the total number of all court cases opened last
Majidzadeh, a government economist, said, "Amendments to the cheque law, which
were intended to reduce the number of incarcerations, caused individuals to take
more risks in writing cheques and subsequently caused an increase in the number
of bounced cheques and this resulted in loss of acceptability of cheques for
merchant at the Tehran Bazaar said, "The majority of shopkeepers only do
business with customers who have cash. Cheques are almost no longer used in
number of bounced cheques and the massive debts run up by firms to the country's
banks caused the Majlis Economic Commission to launch a scheme last August
allowing certain firms to buy the banks' bad debts at a discount.
Ghavamin, which is affiliated to the police, buys cheques with a face value of
more than 100,000 dollars and uses its legal and executive connections to
collect the debt.
someone who acts as a debt collector is traditionally known as a "Sharkhar" -
which literally means somebody who is looking for trouble.
buy the bounced cheques at a discount of three to ten per cent of the face value
and sue the issuer. They traditionally also deploy a range of methods including
threatening phone calls and physical threats to collect the money.
year, the judiciary presented the government with a new bill to review the
cheque laws. This would make it illegal to write a cheque not covered by
sufficient funds. Banks would also be responsible for assessing the credit of
any customer who requests a chequebook. The fate of the proposal is not known,
... Payvand News - 06/04/10 ... --