Participation papers Banking and insurance in Iran

an important development iranian capital markets opening of fixed income market first time in 2009 issuance of term deposit certificates (traded otc). type of tradable islamic bond in iran participation paper . these typically short term bonds (1–3 years) , have same economic characteristics fixed-rate conventional corporate bonds. participation loans (known musharakat (in persian) or musharakah (in arabic)) interest rate charged banks dependent on profitability of project financing required (as in project finance). in april 2011, government s plan limit maximum rate @ 20%.

profit , awards accrued participation papers tax exempt. central bank must obtain approval majlis in order issue participation papers. @ 2012, regulations fixed income instruments oblige market maker buys papers sellers in secondary market @ par value if there no other buyers present. participation papers, @ end of project profit must calculated , can distributed among shareholders. during time, dividends or interest can paid.

around 9 billion euros worth of participation bonds in foreign currency , iranian rials have been allocated different projects in oil ministry in 2010. 3 billion euros allocated south pars gas field , rest go oil field development projects.

bank mellat s june 2010 offering of bonds worth 250 million euro overseas considered third stage of offering total of 1 billion euro in bonds designed finance development of phases 15-18 of iran’s south pars natural gas. bond has maturity of 3 years , interest rate of 8 percent.
new issues in july 2010 included $300 million of papers tehran municipality , $100 million of participation papers ministry of energy. vast majority of these participation papers pay coupon rates of 2-3% above bank rates.
also in july 2010, iran & shargh leasing co. (the first non-bank entity list fixed income product on otc market) listed $8 million worth of participation papers.
in august 2010, iran sold $500 million worth of bonds first development phase of gas deposit. three-year bonds, yield 16 percent.
in november 2010, iran sell rial bonds worth $2.3 billion finance second development phase of south pars gas field. bonds sold through bank saderat iran, bank melli iran , pars oil , gas co. previously, pogc had sold $1.5 billion worth of papers same purpose. these papers pay coupon of 16% per annum , have tenure of 4 years.
in november 2010 keshavarzi bank listed $100 million of one-year tradable certificate of deposit (cd’s) annual interest rate of 15%.
iran’s national budget 2012-13 has envisaged issuing €12.5 billion in bonds financing domestic oil projects.

for up-to-date amounts , list of issuing agencies, see cbi s annual review(s) here.