Iran's Hijab Bill Triggers Outcry and Bankruptcy Concerns Over Dress Code Fines

The direct deduction of fines for not wearing a headscarf from bank accounts has emerged as one of the most contentious aspects of the Hijab and Chastity Bill.

This provision has sparked widespread criticism and opposition from the public, various experts, and even individuals within the governing structure.

Presented to parliament on May 24, 2023, by the government of Ebrahim Raisi, the bill outlines severe penalties for women who violate the mandatory headscarf rules.

Non-compliance with the Islamic Republic’s strict dress code is deemed as "nudity," with offenders facing fines of up to 8 million tomans ($150).

These fines double if not paid within a month, and offenders could lose their jobs and be banned from social media activities for up to one year.

Repeat offenders would face imprisonment ranging from six months to three years.

Mohammed Sadr, a member of the Expediency Assessment Council, perceives the bill's introduction as a manifestation of foreign influences and clandestine adversaries.

He warns of its potential perilous cultural and social ramifications, including the erosion of trust, economic setbacks, and even the collapse of Iranian banks.

Some experts anticipate that its implementation could lead to bank bankruptcies, while others deem bankruptcy improbable.

Nevertheless, they foresee a rise in banking disparities, inflation rates, and further depreciation of the national currency.

Under the hijab and chastity bill, the government would be authorized to withdraw fines directly from individuals' bank accounts for not adhering to hijab regulations.

Many economic experts argue that a fundamental condition for fostering trust in banks is assuring individuals that their assets are protected from interference under any circumstances.

This assurance allows for the seamless utilization of banking services.

However, legislation such as the proposed hijab and chastity bill conveys a stark message: the government claims ultimate ownership over people's assets in banks.

It implies that failure to comply with governmental directives could result in the confiscation of assets at the government's discretion.

Legal professionals, including lawyer and human rights activist Qassim Bodi, have voiced concerns about this proposal, deeming such governmental actions illegal and a violation of citizens' rights.

Bodi advises individuals to consider limiting their use of bank accounts if this law is ultimately approved.

In response to this development, people are exploring alternative methods to safeguard their assets.

However, there is growing concern over the potential for a bank rush and subsequent bankruptcy, a scenario predicted by individuals like Mohammed Sadr.

Such a bank rush occurs when a significant portion of a bank's clientele simultaneously withdraws funds.

Banks lacking adequate liquidity to fulfill these withdrawals may face collapse and bankruptcy.

Given the widespread implications of the hijab and chastity bill, the entire banking system of the country could be at risk.

On the flip side, assessing the capital adequacy of the country's banks already provides insights into their vulnerability to bankruptcy.

Observers believe that the approval of such a bill could significantly impact the outflow of capital from banks, especially affecting small funds, which hold considerable value for banks and are viewed as a vital and dependable source of liquidity.

With the introduction of the direct penalty withdrawal scheme, small account holders, fearing the loss of their modest investments, may be more inclined to withdraw their balances compared to owners of larger accounts, who are often domestic traders and entrepreneurs engaged in financial transactions with banks.

This could result in substantial losses for banks due to the outflow of essential and stable capital, potentially dealing a severe blow to the country's banking system.

Many question why women's attire has been thrust into the forefront of an economic and livelihood crisis, especially when numerous government officials acknowledge the dire economic conditions as the primary concern of the populace.

The controversial bill was drafted following months-long nationwide protests demanding more freedoms and women’s rights.

In Iran, all women must conceal their hair with a headscarf and wear loose-fitting trousers under their coats while in public, but a growing number of Iranian women have appeared in public without head coverings.

In response, authorities have closed down hundreds of businesses for failing to observe hijab rules, and taxi drivers have been fined for transporting women without headscarves.

Police and volunteers issue warnings in subways, airports, and other public places, while text messages have targeted drivers who had women without a head covering in their vehicles.