Capital market and financial instruments
Economic growth, prosperity and provision of welfare services are Iran’s eleventh government overriding priorities and their crucial importance has been emphasized by Supreme Leader of the Islamic Republic of Iran. State - owned entities and private companies raise long - term funds on the primary and secondary capital markets using financial instruments designed by financiers and experts.
Economic growth, prosperity and provision of welfare services are Iran's eleventh government overriding priorities and their crucial importance has been emphasized by Supreme Leader of the Islamic Republic of Iran. State-owned entities and private companies raise long-term funds on the primary and secondary capital markets using financial instruments designed by financiers and experts. The Sharia Board of Securities and Exchange Organization (SEO) then ensure compliance with Islamic law (Sharia) and Securities and Exchange High Council finally approves of the use of financial instruments. Transparency and competitiveness of capital markets minimize credit and default risks. This writing familiarizes you with merits and usage of financial instruments.
Islamic Treasury Securities
A government bond is a bond issued by a national government, generally with a promise to repay the face value on the maturity date which is qualified for tax exemption. These bonds are zero-coupon instead they are sold at a discount of the "par value" (OID) to create a positive yield to maturity. Sukuk are "debt instruments". Iran's Ministry of Economy can prioritize both contactors and projects across the country and issue Islamic securities accordingly on a weekly or monthly basis in "Iran Fara Bourse (Iran's OTC market)" in order to raise capital and debt clearance.
SUKUK in Iran's OTC market (IFB)
Sukuk are currently among the best ways of financing state-owned entities and projects. "Sukuk al Ijarah", "Sukuk al Musharaka", "Sukuk al Intifa'a" and "Sukuk al Mudaraba" are listed on Iran's Fara Bourse. "Sharia-compliant insurance" and "Waqf instruments" are currently being designed.
Exchange-traded fund (ETF)
An exchange-traded fund (ETF) is an investment fund traded on stock exchanges much like stocks. In 2013, Iran Capital market witnessed the appearance of ETF as a new financial instrument. There are various types of ETFs:
1- Sector ETFs; These types of funds invest in particular sectors or specific niche areas like green power or sports.
2- Traded pension funds; A pension fund is any plan, fund, or scheme which provides retirement income. They are especially important to the stock market where large institutional investors dominate. Iran pension funds are facing a range of issues and funds are withdrawn.
Other instruments and financial institutions
In order to boost private sector participation, other innovative financial instruments are either listed on Iran's OTC market (IFB) or being designed:
1-Certificate of Deposit (CD); CDs are "debt instruments" and are listed in Iran's OTC market
2-Convertible securities; a "convertible security" is a security that can be converted into a different security-typically shares of the company's common stock.
3- Real Estate Fund; real estate fund was established by IFB to raise capital for housing and real estate projects.
4-Project Fund; this type of fund is licensed to collect public investments and allocate funds to various projects according to the statute of the fund. Prevention of inertia and exploiting potentials of holding companies are the main forces behind the establishment of this type of ETF.
5-Tourism Sukuk al Intifa'a; providing quality travel and tourism services (hotel and airline reservation etc.) using this type of sukuk.
6- Mortgage-backed Securities (MBS); a mortgage-backed security is a type of asset-backed security that is secured by a mortgage. Due to rising housing demand, MBS issuance would make it possible for Bank Maskan to grant more loans in future.