EghtesadOnline: Governor of the Central Bank of Iran joined hands with the heads of two key ministries late Monday to coordinate and accelerate efforts to implement a stimulus package worth 500 trillion rials ($12.85 billion) aimed at propping up production and creating jobs.
Valiollah Seif hosted the rare meeting at the CBI headquarters for exploring ways of implementing the scheme for the second consecutive year, which was attended by Minister of Cooperatives, Labor and Social Welfare Ali Rabie and Minister of Industries, Mining and Trade Mohammad Shariatmadari.
“In line with the expert analyses of the bank, allocating these loans is a logical method to realize the full potential of manufacturing units,” Seif was quoted as saying by the official website of the bank.
The much-hailed plan will allocate 300 trillion rials ($8 billion) worth of credits through the banking system to small- and medium-sized enterprises with the ultimate aim of sustaining production, Financial Tribune reported.
As first announced in early June, 200 trillion rials ($5.33 billion) of the funds will go to meet working capital needs of these entities and finance incomplete projects with a physical progress of at least 60% while the remaining 100 trillion rials ($2.66 billion) will be allocated for rebuilding and renovating business units that are technically and economically feasible.
SMEs are the first priority for receiving the earmarked funds after being ignored in much of the past when big companies devoured the larger share of bank credits, many of which turned into bad loans and strained lenders’ ability to provide loans to small businesses and startups.
At Monday’s meeting, Seif said considering the funding limit for each SME, provincial credit committees will be in charge of evaluating and approving the loan recipients.
“The other factor that must be considered is job creation that makes the matter of allocating the funds even more important,” he added.
As part of the scheme, the banking system is to dole out 200 trillion rials ($5.33 billion) specifically for creating new jobs across the country.
As Seif outlined, the banking system handed out a total of 5.48 quadrillion rials ($146 billion) worth of loans during the previous year while “our prediction for the current fiscal year [to March 2018] is that the banking system can allocate more than 6.71 quadrillion rials ($176 billion)”.
Thanking industries and cooperatives ministries for their realistic expectations from the banking system, Seif said the administration of President Hassan Rouhani aims to minimize the annual budget’s dependence on banking resources.
The industries minister pointed to the continued support of banking system for industrial units, saying that in the previous fiscal year to March 2017, more than 2.31 quadrillion rials ($60 billion) of the banking resources were injected into the industrial sector.
“The banking system is currently facing challenges,” conceded Shariatmadari, but added that “we expect it to assist us in supporting economic growth like last year so that we can register a positive performance in the second half of the year”.
The cooperatives minister stressed that the future of job creation lies with SMEs, noting that studies conducted by his ministry show 85% of the nation’s employment exists in these businesses.
“About 96% of the country’s production units have fewer than 10 employees,” he added.
Rabiei noted that nations supporting their SMEs have had a successful experience, therefore the support of banks could give rise to “a grand transition that could lead to very productive results”.