Purpose: This paper aimed to diagnose the role of Iran’s banking system focusing on Bank Sepah as a case in financing the knowledge-based economy. Although knowledge-based companies constitute more than 11% of the country’s active economic enterprises, they received only 4.8% of the banking network’s facilities in 2023, and Bank Sepah’s share (2.2%) lags well behind comparable banks, revealing a substantial financing gap. The study seeks to identify the structural, behavioral, and contextual challenges that hinder the banking system from playing an effective role in developing the knowledge-based economy and to propose corresponding policy solutions.

Methodology: The research is applied-developmental in purpose and qualitative-interpretive in method, employing a descriptive-analytical case-study strategy. Based on the principle of triangulation, data were gathered from three complementary sources documentary analysis, semi-structured interviews, and focus-group sessions and analyzed through thematic analysis within the framework of Mirzaei Ahranjani’s “Three-Branch Model” (structural, behavioral, and contextual factors). Purposive sampling was applied, and the trustworthiness of the findings was ensured through methodological triangulation, member checking, and independent coding.

Findings: The pathologies of the banking system in the knowledge-based domain are not single-cause but stem from an interconnected causal network of three sets of factors: structural factors (post-merger strategic ambiguity, uniform credit-evaluation procedures, and limited acceptance of intellectual property as collateral); behavioral factors (institutionalized risk aversion, short-term return expectations, the tendency toward enterprise ownership, and information asymmetry); and contextual factors (a stringent legal framework, the gap between legal text and banking practice, macroeconomic instability, and international sanctions). The findings indicate that the fundamental challenge is “institutional-procedural” rather than “resource-based.”

Originality/Value: This study provides the first systematic pathology of a specific Iranian bank (Bank Sepah) in the knowledge-based field using the Three-Branch Model, shifting macro-level analysis to the micro-organizational level. By incorporating the variable of the 2019 merger of the armed forces’ banks absent from prior research it offers a coherent set of policy recommendations applied simultaneously across the structural, behavioral, and contextual layers.