Iran's post‐war financial system

Abstract

PurposeThe purpose of this study is to provide solid examination of Iran's Islamic financial system and its development after the end of the Iran‐Iraq war in 1988.Design/methodology/approachThe analysis is conducted by using financial data over the period 1993‐2007 as solid data aren't available for the period 1988‐1992. Parallel, 39 other countries are analyzed as well in order to have a solid international basis of comparison. The data are provided by the World Bank's financial dataset. The paper computes three key‐indices referring to the activity, efficiency, and size of Iran's financial sectors. A fourth measure is calculated as an aggregated index of the three key‐indices in order to allow a vivid comparison with other countries.FindingsIran's financial system is apparently highly bank‐based. The paper can confirm that Iran has been struggling for a less bank‐based financial system during this period. Although Iran still shows up a mainly bank‐based financial system, its financial market has been growing by considerable rates during the examined period. When referring to the international comparison, Iran shows up an underdeveloped and weak financial system, especially in regard to its stock market.Originality/valueThere haven't been any similar research for this time period using this kind of indices. Especially, Iranian economists haven't used this very comprehensive approach in order to confirm the widely made assumption of a bank‐based Iranian financial system. This study sheds light on the topic and at the same time offers a comprehensive picture of Iran's financial system.