The Ministry of Economy, Central Bank of Iran and Ministry of Industry, Mine and Trade signed an agreement on Saturday to enhance financial support for domestic producers.
According to IBENA, the agreement, signed by CBI governor Ali Salehabadi, Economy Minister Ehsan Khandouzi and Minister of Industries Reza Fatemi Amin, consists of 22 articles designed to improve funding for production companies.
As per the agreement, banks will be obliged to extend 9,330 trillion rials ($29.4 billion) in working capital and 2,340 trillion rials ($7.3b) in other support to the industry and mining sectors by the end of the current fiscal year in March 2023.
Moreover, 1,000 trillion rials ($3.15) worth of "Productive Credit Certificates", known by the Persian acronym Gam, would be issued. This is to be used as an instrument for funding businesses in oil and gas, petrochemicals, chemical and agro-food industries, as a part of the government's supply chain finance initiative.
Gam is a market-oriented financial instrument that can be traded in the money and capital markets. Lenders assist credible businesses by offering tradable credit certificates similar to LCs. The certificate can be given to suppliers of raw materials, machinery and equipment.
Like bonds, certificates have maturity dates. The supplier can cash the certificate by selling it in the stock market but no money is exchanged.
Gam is one of the integral components of the government’s initiative to implement supply chain finance (SCF). The CBI recently revised guidelines to make the best use of Gam.
The SCF program was unveiled by the CBI in January to improve lending efficiency and navigate bank resources toward production units.
The SCF focuses on credit instruments rather than direct borrowing, minimizing the diversion of bank resources into non-production and speculative markets, plus improve and expand oversight on lending to manufactures.
The agreement includes plans for allowing lenders to issue debt guarantees worth 500 trillion rials ($1.57 billion), loans for renovation of industrial units, promote credit cards and microloans to consumers.
