Pathology of Bank-Owned Enterprises and Optimal Strategies for Corporate Financing Under Sanctions

Abstract

This article investigates the role and impact of banks in financing production in Iran and the associated challenges of bank-owned enterprises within the banking system. Banks, as pivotal institutions in providing capital for production and economic activities, bear significant responsibility in the national economy. Based on available data, changes in their share of production financing reflect both growth and challenges faced by banks in recent years. Despite their critical role, issues such as economic sanctions, international restrictions, and structural problems have had adverse effects on their performance. These factors have diminished banks' ability to attract new deposits and reduced their competitiveness in the market. The present article also analyzes the existing financing methods, such as bank loans, lease-to-own arrangements, and bond issuance, emphasizing the importance of selecting the most appropriate financing method considering the current conditions. In conclusion, several recommendations are proposed to improve the state of financing and enhance banks’ efficiency in supporting production. Among the suggested strategies are reducing credit constraints, developing innovative financial instruments, and enhancing interbank cooperation, all of which could contribute to improved economic conditions.