The Role of leasing In Iran\'s Credit System

Advances in leasing industry as a means of finance mainly started in 1900 though leasing dates back to centuries ago. Despite its differences in different countries as a result of differences in laws and regulations, finance function has been a common distinctive function of leasing all over the world. Leasing has its modern and unique features and advantages to establish itself as one of the most important means of finance in countries' economies. Studies by famous economic and research institutes of the world indicate that leasing ranks second among methods of finance with banks standing at the top. Although a major portion of leasing activities has mainly occurred in highly advanced economies, it will keep growing in such newly emerging markets as Iran in the future. Having existed in Iran for 30 years, leasing industry is making progress toward completion. Figures show that over 300 leasing companies have been established in Iran most of which have been set up in the last 5 years. This article sets out to explain the role of leasing industry in the country's credit system. It first gives an account of the theoretical bases of leasing industry and continues with the status of leasing in Iran and in the world. The final sections explain the different aspects of leasing including its legal aspects, pricing, credit risk, methods of financing, and its development capacities in the country. JEL Classification: G23