EghtesadOnline: State-owned Bank Melli Iran has granted 7,612 debt purchase applicants facilities worth 11.78 trillion rials ($100.7 million) in the first four months (March 21-July 22) of the current fiscal year.
The facilities include provision of liquidity for businesses with BMI buying their financial documents like checks and promissory notes with longer maturity dates, according to a report published on the bank’s website.
The bank granted 40.27 trillion rials ($344.2 million) debt purchase loans to applicants via 19,916 debt purchase contracts in the last fiscal year that ended in March 2019.
Debt purchase contracts, widely used in Islamic banks around the world, had not been popular with Iranian banks, Financial Tribune reported.
Under the contracts, a long-term debt can be purchased for a portion of the face value of the debt. In the case of debt purchase contracts within the banking system, the creditor or debt seller sell an overdue debt to the bank, as a debt buyer, at a price lower than the debt’s face value.
According to the BMI, all economic sectors are eligible for debt purchase facilities.
As per rules, the maturity date of cashable financial documents must not exceed one year.
Purchasing multiple financial documents with different maturity dates is possible through a single contract.
Promoting Domestic Manufactures
With the aim of supporting domestic manufactures and promoting local markets, BMI paid 2.04 trillion in loans for buying locally-made goods since the beginning of the year to late July.
The loans were given to 15,989 applicants and reached 8.6 trillion rials ($73 million) in the form of 82,000 contracts in the past fiscal year.
During the same period, BMI paid 50.83 trillion rials ($427 million) in loans to augment the working capital of manufacturers, create jobs and curb recession.