In line with concerted government efforts to support manufactures, banks plan to lend 300 trillion rials ($2.3 billion) to small and medium-sized enterprises in the current fiscal year that ends in March 2020.
In a meeting with representatives of chambers of commerce, cooperatives and guilds, the central bank boss Abdolnasser Hemmati said the “CBI is committed to supporting SMEs”, the CBI official website reported.
As part of efforts to boost the struggling local production sectors and curb recession, he spoke of a CBI plan dubbed ‘productive working capital.’
Hemmati said the plan is currently under review by special advisory committees and will be unveiled after collaboration with economic and financial experts.
The action plan reportedly seeks to ensure that funds earmarked for manufacturing units is strictly used to only address the needs of this key sector in an optimal manner and assuring that CBI funds are not allocated for non-productive activities.
Last week, Hemmati reiterated CBI plans to readjust policies regarding working capital given to manufacturing units and ensure that the loans are actually used for the intended objectives: raising production and curbing inflation.
Seeking Assurances
“Any plan undertaken to address the issue should in the first place ensure that the loans meet the working capital needs of businesses. Second, it should be utilized only by production companies. If not, the result would be more inflation and (further) price shocks”, Hemmati wrote in an Instagram post.
In a report on loans to diverse sectors in the last fiscal year (ended in March), of a total 7,737 trillion rials ($60 billion), 4,319 trillion rials ($33.3 billion) was allocated to help raise the working capital of businesses.
The CBI said the large share of working capital loans was largely due to the regulator’s concerns about manufacturers struggling in the increasingly difficult economic climate, coupled with the tanking of the rial, higher raw material costs and the mounting pressure of new US sanctions.
Production costs have surged in recent months following sharp volatility in currency rates last year that pulled the rial to unprecedented lows, which by extension resulted in steep increase in the price of input sourced from overseas and inside the country.
This pushed businesses on the verge of bankruptcy as many struggled to meet their working capital needs from banks and remain afloat.
According to data released by the Statistical Center of Iran, the industrial sector's average Producer Price Index in the last fiscal year grew by 64.6% compared to the same period a year ago.
Likewise, the average PPI for the mining sector in the last fiscal year jumped 50.9% compared to the year before.
