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EghtesadOnline: Banks and credit institutions paid 5,060.8 trillion rials ($18 billion) in loans to businesses in the first five months of the current fiscal year (March 20-August 21).

Compared to lending in the first five months of the previous year, the amount increased by 2,101 trillion rials ($7.5b) or 71%, according to data released by the Central Bank of Iran. 

Loans to boost working capital of manufactures topped the list with 3,074.6 trillion rials ($11b) given to assorted sectors, namely mines, industries, housing, agriculture and services. 

Working capital loans accounted for 60.8% of the total with the mines and agriculture sector getting the biggest share.

Data indicate an increase of 79.8%, or 1,364.3 trillion rials, in loans to imrove working capital on an annualized basis. Mines and industries accounted for 1,200.2 trillion rials in this segment or 77% of the total.

The big leap in lending is attributed to expansionary monetary policies of the CBI to inject money into the economy at the beginning of the year to mitigate the impact of the deadly coronavirus on businesses. 

The central bank was instructed by the government in April to help low-income households and businesses impacted by the deadly disease. 

The government had approved 750 trillion rials ($2.6b) in financial aid, from which 500 trillion rials went to SMEs and the remaining to needy households in the form of interest-free microcredit.  

Addressing the financial needs of enterprises have gained traction in recent months as the government struggles to save jobs, mitigate the damage from Covid-19, improve domestic production and cut imports. 


Purpose and Sectors 

Apart from working capital, banks accepted loan requests from other quarters including for creating and expanding business, repairs/renovation and buying homes.

Banks lent 598 trillion rials for setting up new businesses, 407.52 trillion rials for expansion (of businesses), 127.77 trillion rials for repairs and renovation”, 407.5 trillion rials for purchasing goods and 111.8 trillion rials to first-time homebuyers. Loans for miscellaneous purposes amounted to 216.4 trillion rials.

After working capital, loans for creating new businesses were the second priority of banks with 11.8% of the borrowed money. 

Buying goods was the third target with 10.4% share followed by loans to expand businesses, which accounted for 8.1%. In the diverse economic category, the services sector outperformed others by borrowing 1,787.8 trillion rials.   

The next major borrowers were industries and mines followed by the commercial sector with 1,559.34 trillion rials and 1,027 trillion rials, respectively. 

Agriculture and housing had the smallest share. Loans to farmers reached 375 trillion rials and to the housing sector 308.25 trillion rials. 



Credit Institutions Banks Businesses Loans