Iran’s Bank Mellat to issue first euro-denominated Murabaha bonds worth $200mn

By bne IntelliNews November 1, 2023

Bank Mellat, one of the largest banks in Iran, will issue $200mn worth of Murabaha bonds in foreign currency next week,  the banks’ website quoted Reza Dolatabadi, the CEO, as saying on November 1. 

The bonds are one of the new foreign currency instruments introduced by the Central Bank of Iran (CBI) with the aim of strengthening fixed capital formation and securing foreign currency resources to complete national projects with high-profit potential.

The bonds are securities that show that the bondholder is the owner and creditor of a debt that comes from a Murabaha agreement. Murabaha, also referred to as cost-plus financing, is an Islamic financing structure wherein the seller and buyer mutually agree on the cost and markup of an asset. The markup replaces the interest.

The bonds will be issued via the Iran Currency Exchange (ICE) and will have a maturity period of one to four years. The interest rates will be denominated in euros and range from 5-5.5% annually. 

This is the first time euro-denominated Murabaha bonds are being issued in Iran.

The issuance of these bonds is strictly authorized only by entities holding a permit from the CBI's Foreign Exchange Commission.

“The new bonds will help us direct a considerable portion of foreign currency funds kept by exchange shops or companies towards the production sector,” Dolatabadi said. 

ICE was launched by the CBI in February 2023, amid fluctuations in foreign exchange rates. The CBI has been working to promote the ICE as the sole legitimate currency market, where the prices are set under the central bank supervision. The main goal of the ICE is to keep the free currency markets in check. 

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