Assessing the performance of development banking in Iran's economy; Using a composite Indicator

Document Type : Original Article

Authors

1 Imam Sadiq University

2 imam Sadiq University

3 Kharazmi University

Abstract
Among the most important reasons for establishing development banks are:
- Helping to rebuild the economies of countries;
- Strengthening infrastructure and strategic sectors;
- Separating commercial loans from development loans.
High risk and long-term returns are a major feature of large-scale economic projects, which means that the private sector does not have sufficient incentive to invest, and instead, development banks, which are considered government institutions, provide financing.

Using common bank performance evaluation criteria - which are mainly based on profitability - to measure the efficiency of development banks, whose objective function is different from that of commercial banks, is a strategic error.

In other words, the neglected point in the performance evaluation indicators of state banks, and especially development banks, is the lack of attention to the extent to which banks benefit the country's economy, which can lead to state banks being pushed into competition with private banks and as a result, the stalling of large-scale development projects.

On this basis, this research proposes three dimensions: "bank health", "development orientation" and "justice orientation", along with their relevant indicators for measuring the performance of development banks.

The dimensions, components and indicators are weighted using the Analytic Hierarchy Process (AHP) method and a composite index is calculated for 5 development banks in the country during the years 1391 to 1400.

The results show that although the performance of development banking has improved in recent years, it is still far from satisfactory.

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  • Receive Date 04 February 2024
  • Revise Date 31 May 2024
  • Accept Date 31 August 2024