Central Securities Depository Of IRAN

background

 

The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted by all United Nations Member States in 2015 as a universal call to action to end poverty, protect the planet and ensure that all people enjoy peace and prosperity by 2030.

The 17 SDGs are integrated—that is, they recognize that action in one area will affect outcomes in others and that development must balance social, economic, and environmental sustainability.

CSDI that sees itself as a responsible member of the Iranian society, more specifically a member of the Iranian capital market, has consistently tried to comply with the UN-defined goals to promote development and prosperity in the country. The list of CSDI activities to follow the SDGs principles is as below:

 

1.     Goal 1: No poverty

 

  • CSDI Role in Justice Shares, Privatization of Public Companies 

Justice Share scheme and privatization of big governmental companies have been among the major mechanisms employed by the Iranian government in the country's capital market in an attempt to eradicate poverty.

According to the Fourth Five-Year Economic Development Plan (2005–2010), the Privatization Organization of Iran, affiliated with the Ministry of Economic Affairs and Finance, has been tasked to be in charge of ceding shares to the public on the Tehran Stock Exchange.

Some 80 percent of companies subject to Article 44 of the Iranian Constitution have been transferred to the public ownership, 40 percent of which was conducted through the "Justice Share" scheme and the rest through the offering of their shares in the Iranian capital market. 

 

Justice Shares Distribution

The low-income strata of society received justice shares at a 50 percent discount and would pay the amount in 10-year installments. Villagers and nomads had priority in this respect. Those covered by charity services rendered by the State Welfare Organizations; also the jobless war veterans are prioritized in the first phase of the Justice Share scheme. 

The shares belong to big enterprises and state institutions such as those from the auto-making industry, steel, mines, insurance institutions, banks, aviation industry, shipping, power plants, telecommunications, oil, and gas.

Up to 49 million residents who qualify for the shares have been identified. The Government is promoting the shareholding culture and financial literacy in Iran through the Justice Share scheme. 

The index of the Tehran Stock Exchange (TEDPIX) grew more than 200% during the last fiscal year (March 2019-20) and it has gained close to 70% since the beginning of the year. 

Shareholders now have the option to either directly gain the ownership of their shares and sell it in the stock exchange, or let the investment companies manage their portfolio as in the past.

 

Objectives

The ultimate goal of privatization and the justice share scheme is to increase productivity and sustainable job creation. Appropriate privatization encourages investment by natural or non-state legal persons in economic projects or entities and allows them majority shareholding to control relevant enterprises. Other major objectives of the program are as below:

  • Help make self-sufficient households independent and reduce direct government financial support to them
  • Accelerate the privatization process by transferring shares of state-owned companies
  • Apply healthy and transparent ways to transfer corporate shares
  • Shrink the government and increasing public ownership
  • Expand the share of the cooperative sector in the country
  • Facilitate balanced distribution of wealth and income in the country

 

CSDI's Role in Justice Share Program

Central Securities Depository of Iran as the sole entity in the Iranian capital market dealing with registry, dividend distribution, and other services for both investors and issuer companies, has defined its roles in the Justice Share scheme listed as below:

  • CSDI issues trading accounts for shareholders of the Justice Shares, also it authenticates their identities so that they can enter the capital market in a secure, transparent atmosphere
  • Provides the necessary infrastructure for the release of Justice Shares
  • Safekeeps all the required information regarding shareholders
  • Expands its divergent capital market services to the Justice Shares holders
  • Distributes dividends, helps shareholders increase their capital, buy and sell their shares
  • Provides daily transparent reports regarding their activities
  • Settles daily trades of shares related to companies listed in the scheme
  • Sets up a specific call center to respond to questions and any ambiguities shareholder may come up with
  • Provides the possibility for shareholders to view the daily value of their shares online
  • Transfers shares of the deceased to their heirs

 

Unique Role of CSDI's CEO in Justice Shares Program 

Chief Executive Officer of Central Securities Depository of Iran, Hossein Fahimi, has played an important role in the release of Justice Shares. He is now the spokesperson of the program and routinely participates in various related meetings in the Economy and Finance Ministry, the Privatization Organization of Iran, Securities and Exchange Organization, the High Council of Securities Exchange, etc. 

Since the release of the Justice Shares in April 2020, as the spokesperson of the Justice Share Program, Mr.Fahimi, has strived to respond effectively to inquiries by the community of shareholders through public briefings and his active and consistent presence in mass media and other types of press.

The list of roles and responsibilities of CSDI's CEO in the Justice Share Program comes in below: 

  • Establishment of additional centers active on the authentication of shareholders' identity. 
  • Deployment of CSDI's indigenously made e-KYC system known as Comprehensive Information Gathering System (CIGS) in several banks including Parsian, Shahr, Saderat, Sepah, and Keshavarzi as well as Melal Credit institution.
  • Active presence in decision making processes at meetings of the High Council of Securities and Exchange as well as in strategic meetings of the Special Commission on Release of Justice Shares.
  • Fulfillment of responsibilities of the spokesperson of the Special Commission on Release of Justice Share and holding regular media briefings.
  • Launched a new call center specifically for Justice Share's affairs to assist the facilitated access of shareholders to related information.
  • Facilitated online authentication of shareholders' identities in collaboration with Presidential Deputy for Science and Technology and science-based teams, applying artificial intelligence (AI) in the applications.
  • Tasked CSDI's Planning and Development Department to prepare and launch a comprehensive FAQ page in collaboration with Public Relations Department.

 

Goal 2: Zero Hunger

 

Achieving "zero hunger", as one of the Sustainable Development Goals, requires food security and sustainable agriculture. Commodity Exchanges can play a strategic role in realizing the "SDG’s goal 2" as part of the complex inter-linkages between food security, and sustainable agriculture.

Acknowledging the fact that sustainable and accelerated development of agriculture is the key to economic prosperity in developing countries, the Iranian capital market as a responsible member within the Iranian economy tries to effectively meet the challenges facing the non-green developing country that needs to design and implement effective policies for agriculture. 

 

  • Certificate of Deposit

"Commodity Certificate of Deposit" and using them as collateral best explains how the Central Securities Depository of Iran exercises well-regulated macro-financial policies to help accelerate the development of agriculture in the economic context of Iran.

In most emerging markets, lack of acceptable collateral is often cited as a key constraint on the provision of credit to agriculture, and Iranian farmers are no exception.

Three main types of collateral are typically used to finance agriculture: farmland, equipment, and agricultural commodities. 

1- Using farmland as collateral - if not impossible - can often be an uphill battle. Especially during uncertain economic times or shaky mortgage landscapes. It can also be difficult for lenders to repossess.

2- Likewise, leasing out equipment can be tough as well. The line of buyers is usually small, in case of default and there is a lack of mechanization. 

3- Using agricultural commodities as collateral is increasingly being explored in various countries. 

Agricultural commodities have established value and market. Quick liquidation mechanisms can provide sufficient funds to cover a loan extended against them in case of a default.

A financial instrument like commodity-backed finance or Salam (future) contracts can enable producer organizations and cooperatives to strengthen their negotiation power in the market. The ability to access post-harvest credit enables them to sell their crop over time rather than immediately after harvest when prices are usually low. 

Also, the inventory credit was introduced to offer solutions to the challenges of financing agricultural production and addressing farmers' problems by making it easier for them to obtain credit at a reasonable price.

Our value-added service with its highly integrated quality which connects the whole process seamlessly comes to the rescue of the farmer who fears loss under market conditions in the harvest season.

We in CSDI, encourage the farmer to deposit his commodities at third-party warehouses accredited by the Securities and Exchange Organization (SEO) available almost everywhere in different locations across Iran. 

Therefore the farmers no longer feel compelled to sell off their produce at a cruelly low price or leave them across the country to rot. 

Warehouse operators receive the crops and issue a "Warehouse Receipt" as evidence that specified commodities of stated quality and quantity have been deposited at a particular location by named depositor(s). They send the receipt to us – that is Central Securities Depository of Iran where we officially register the receipt and issue a "Certificate of Deposit (CD)" based on the stored underlying asset mentioned on the "Warehouse Receipt" and returns it to the warehouse (all the process is done electronically through a dedicated system). The warehouse then hands in the "CD" to the farmer who can now use it as collateral to borrow from banks. For greater security, the "CD" has to be registered at CSDI that also plays as the collateral registry.

The CDs as securities can be traded on the secondary market, which in this case is Iran Mercantile Exchange. In other words, now CD holders have two options:

They can sell CDs through any brokerage house that has permission to trade on the Iran Mercantile Exchange (IME).  

They can receive funding from the bank for the CD at some discount on the value of the "warehouse receipt." I mean loans tend to be a certain percentage of the total value of the crop to account for the storage and financing costs, as well as factors such as price volatility history and the trust they put in the warehouse operator.  

Here, in our customized system, the local farmer is legally bound to present a power of attorney to give the bank the authority to sell his crops in case of default. With this in effect, both the farmer and the banker are legally authorized to sell the inventory that the farmer owns and this is the difference with the conventional CDs.

However, what makes it interesting is that, to the comfort of the banker, CSDI has developed a sophisticated system that provides real-time linkage between the bank and the collateral management entity, which is the CSDI itself. 

Through the system, the banker submits a request to CSDI to pledge farmers' "Certificate of Deposit" as collateral for a loan. Then, the CSDI creates a specific trading account through which allows both the farmer and the banker to sell the inventory. When the depositor sells the CD, he has sold the collateral.  

In either case, the fund earned as a result of the CD sale on the trading floor will be directed to CSDI. Then, we transfer the money to the bank. The bank will determine the loan amount, in addition to the interest on the loan, deducts it from the incoming fund from the sale of total assets, and deposits the rest to the farmers' account. The bank then authorizes the collateral management entity – that is the CSDI - to release the inventories to the new owner. 

Along with the mechanism, in a related move to boost both food security and capital market trading, Central Asset Management Company which is one of the subsidiaries of Central Securities Depository of Iran has begun issuing Murabaha securities on four different occasions since 2010, as well as the Ijarah securities on one occasion to finance food production activities in the country with a total value of 32,700 billion Rials.

 

3: Good health and well-being

 

Promoting the Public's health is essential to sustainable development in line with “SDG goal number 3” which says the good health and well-being of humans wherever they are, reflects the complexity and interconnectedness of the two. Expansion of universal health coverage will be integral to achieving SDG goal 3, putting an end to poverty, and reducing inequalities. 

In line with the SDG goal 3, which is an effective measure to fight against or prevent several leading causes of death and disease in the global society, Central Asset Management Company of the Iranian capital market as one of the subsidiaries of the Central Securities Depository of Iran has issued 2 rounds of Murabaha securities and one round of Manfa'at and Ijarah securities since 2010 to finance the supply of medicine and medical equipment with a total value of 19029 billion Rials.

 

  • CORONAVIRUS; A CRUCIAL CSR ISSUE FOR CSDI

On December 31, 2019, the World Health Organization’s (WHO) China office heard the first reports of a previously-unknown virus behind a number of pneumonia cases in Wuhan, a city in Eastern China with a population of over 11 million.

What started as an epidemic mainly limited to China then became a truly global pandemic. There were over millions of confirmed cases and tens of thousands of deaths worldwide. The disease was detected in more than 200 countries and territories, with Italy, the US and Spain experiencing the most widespread outbreaks outside China. In Iran, there were over 50 thousand confirmed cases and nearly 2,000 deaths as of April 5.

Coronavirus pandemic delivered the one of the fastest, deepest economic shock in the contemporary history of the world.

From the beginning of the spread of the virus, the Iranian capital market joined the campaign to find and implement solutions in the field of prevention and protection of its human assets and market players as well. On the other hand, in the economic field, the capital market made valuable efforts to overcome the crisis while interacting with the country's medical staff fighting the virus throughout the country. Hence, it announced the launch of a crowdfunding campaign to battle the economic impact of the outbreak through issuing special charity securities, dubbed "Corona 1" and "Corona 2" to help fund efforts to contain the spread of COVID-19.

According to Iran FaraBourse, the initiative was launched in coordination with the Health Ministry to address financial concerns of medical researchers and manufacturers of medical equipment in the fight against the deadly virus.

The money went to the Ministry of Health for research, prevention and treatment of the infectious virus. The participants also received a certificate of commendation.

Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. It provides easy accessibility of vast networks of people through social media and websites to bring investors and entrepreneurs together, with the potential to increase entrepreneurship by expanding the investor pool.

"Corona 1" Charity Securities

Both individuals and legal entities could participate. Participants can only purchase and there is no sale to these securities. The money put into purchasing these securities will directly be used for the medical aims fighting the outbreak.

"Corona 2" Charity Securities

Both individuals and legal entities could participate. Participants can purchase these securities. The money will be put into fixed income funds and the like and the interest allocated to these capitals will be used for charity aims, however the capital itself will remain in property of the owner. The buyers can then sell the securities or retain the money when the investment is due. They can also sell the securities prior to due time.

  • CSDI's Role in Charity Campaign against Corona Virus Outbreak
  • CSDI facilitated creation of stock symbols. 
  • CSDI registered "Corona 1" and "Corona 2" stock symbols as quickly as possible.
  • CSDI carried out daily settlement of the trades in regards with "Corona 1"  and "Corona 2" stock symbols in order to release the money.
  • In "Corona 2" symbols, CSDI prepared a list of investors participating in this charity so that it can return the amount that equals with their initial investment at the time it should.
  • CSDI applied zero fees and taxes in settlement of trades in the system responsible to settle the trades regrading "Corona 1" and "Corona 2" securities.

In addition to government fees, CSDI applied no fees for none of the entities working under the Securities and Exchange Organization (SEO) such as brokerage firms.

All the information regarding each recently traded security of "Corona 1" and "Corona 2" was reported to the higher entities benefiting from the trades i.e. The Health Ministry on a daily basis.

It is worth mentioning that the fund collected via the charity campaign was used to provide masks, plastic gloves, sanitizers and hospital gowns and other necessary equipment for the medical staff to prevent, diagnose and treat the patients. The same facilities were also prepared to be distributed among those less-privileged in the society that can hardly provide such preventive measures for themselves and their families.

 

Goal 4: Quality Education

 

As Sustainable Development Goal 4 envisions inclusive and equitable quality education and promote lifelong learning opportunities for all, Central Asset Management Company of the Iranian capital market as subsidiaries of Central Securities Depository of Iran issued two rounds of Ijarah securities to finance educational goals with a total value of 24,000 billion Rials.

Other projects enabled by CSDI in line with SDG goal number 4 are listed below: 

 

  • CSDI Makes Charity Donations in Support of Educational Goals

Academic institutions are among the most enduring institutions in every society. If they are to continue their role at the forefront of social, technological, and economic transformations, the role of philanthropy will become more significant than ever. Sometimes, ambitions of universities to create new knowledge and skills for a better future exceed the ability of governments to pay for them; therefore, complementary and alternative funding is needed and philanthropy would make an increasingly important contribution to help reach the goals.

CSDI has continuously attempted to mobilize all its potentials to support academic institutions' missions and practices. In line with this belief, CSDI has made several donations to academic and educational institutions such as the faculty of management of Allameh Tabataba'i University and a high school for girls in a deprived area of Shahriyar, in the vicinity of the capital Tehran, to name a few.

 

  • Support for knowledge-Based Financial Institutions

Striving for increased focus on its social investment on economic mobility, CSDI has taken concrete measures to continue its contributions to institutions working to expand scientific knowledge, promote Islamic finance, educate experts, and improve the quality of educational and research activities in the area of Islamic finance, such as the "Iranian Association of Islamic Finance" and the " Iranian Economic Law Association".

 

  • Providing funds for academic thesis and dissertation projects
  • Holding educational courses related to the Iranian capital market at all levels 
  • To Sponsor Fintech Challenge Competitions at Sharif University of Technolog

ICT Challenge events are a series of competitions aimed at identifying talented people in the field of ICT.

These events are held under a series of special rules to address challenges in the field of information technology and communications. The participants will be introduced to the companies working in this field.

In each of these events, the focus is on a specific ICT challenge and a competition will be held to resolve that.

The event and its main challenges concentrate on new financial technologies, banking and electronic payment.

Every team and startup active in this field can participate in the competition without any restriction.

In 2020, Central Securities Depository of Iran sponsored this event in order to support events as such.

 

FinStars is the largest financial startup event in Iran, as well as in the Middle East and North Africa. The event gathers around owners of startups, accelerators, investor angels, and venture capital funds. The event provides the opportunity for all stakeholders to network, meet face-to-face, introduce ideas, and create opportunities in an interactive environment. 

FinStars events consist of exhibitions, specialized roundtables, competition, networking space, specialized consulting sessions, workshops, and B2B sessions for startup companies, and provides a unique opportunity for owners of business ideas, FinTech startups, and others to network, learn, identify and examine the existing challenges and trends in this emerging and influential industry in the global economy through objective and constructive interactions. 

Central Securities Depository of Iran in a bid to support the creative projects has sponsored FinStars event.

 

  • Active presence in student competitions such as Exchange Stars League (Investing in Stock Exchange) and Algorithmic Trading Competition
  • Participation in exchange and media events and festivals.
  • Organizing workshops and training courses for university students (both for national and international students)
  • Financial support for a number of local schools in less-privileged areas
  • Co-organizing the Conference of Information Technology Managers
  • Both hosting and sponsoring Islamic Finance Association conferences and workshops
  • Sponsoring five annual events by Islamic finance international in Iran.

 

Goal 5: Gender equality

 

In an attempt to follow the SDG goal of gender equality, CSDI has made every effort to avoid any discrimination based on the gender of its staff and grants equal opportunities for its entire staff no matter their gender. 

A list of measures taken by CSDI in this regard is as follows: 

  • Providing equal employment opportunities for both men and women and their assignment for key posts regardless of gender
  • Equal pay (salary and benefits) for both male and female employees.
  • Assignments of female employees in key posts in the CSDI hierarchy.
  • Two out of the four company’s chiefs are women i.e. Chief Operating Officer, Ms. Fariba Akhavan and Chief Legal Officer, Ms. Farzaneh Yari. (The Chief Operating Officer post is CSDI's most important deputy CEO position that is run by Ms. Fariba Akhavan, who has five sub-managers under her charge.
  • Three important departments of Administration & Human Resource, Internal Audit, and Issuers Affairs are directed by females. 
  • Taking appropriate measures and policies in the protection of expecting women and granting new mothers nine months of maternity leave.
  • Recruitment of more female employees compared to earlier years. 
     

Goal 8: Decent Job and Economic Growth

 

Central Asset Management Company of the Iranian capital market which is one of the subsidiaries of Central Securities Depository of Iran has issued 13 rounds of Murabaha securities, 23 rounds of Ijarah securities, 2 rounds of mortgage securities, and 2 rounds of Manfa'at securities with a total value of 206120 billion Rials since 2010 to finance factories and industrial companies in line with the benevolent policy of providing decent job and help country's economic growth.

 

Goal 9: Industry, innovation, infrastructure

 

Central Asset Management Company of the Iranian capital market, the subsidiary company of Central Securities Depository of Iran, has issued 17 rounds of Murabaha, 38 rounds of Ijarah, 2 rounds of mortgage, and 4 rounds of Manfa'at securities with a total value of 907447 billion Rials since 2010, to finance manufacturing factories and industrial companies, partly in an effort to help expand transportation and communication facilities and equipment in line with the noble goal of boosting national industries, create innovation and improve the country's infrastructure.

 

Goal 10: Reduced Inequalities

 

In order to promote equality in the society and equal access to all services and facilities for all members of society, CSDI has mobilized all its effort to design all its platforms and services in a way that all the people in the society can equally benefit from its services. 

In one of CSDI's latest innovative platforms, i.e., Comprehensive Information Gathering System (CIGS), the company has introduced the capability of authentication even for people with lower literacy levels or people with hearing or speech disabilities who can complete the identity authentication process electronically only with imitating three body movements. 

Also in 2020, portal of "Integrated Electronic General Meeting (DIMA)" was launched and deployed that enables any shareholder anywhere in the world to participate in the issuers' general meetings electronically and have the opportunity to speak up, vote, and comment. Online presence in the general meetings has been one of the most important steps of CSDI in order to reduce inequalities and create equal opportunities for all stockholders to play an active role in their companies’ corporate governance. 

 

Goal 11: Sustainable cities and communities

 

Since 2010, Central Asset Management Company of the Iranian capital market, one of the two subsidiaries of Central Securities Depository of Iran, has issued 2 rounds of Ijarah securities with a total value of 24,000 billion Rials to finance the Ministry of Education.

 

Goal 16: Peace, justice, and strong institutions

By implementation of the justice share project, the main objective everyone has in mind is the ultimate goal of achieving a peaceful society free from discrimination and inequality.