Banks issued 75 trillion rials ($240 million) in ‘Productive Credit Certificates’, known by its Persian acronym Gam, in one month, head of the Central Bank of Iran public relations office said.
In a note on his social media account, Mostafa Qamari-Vafa said the value of Gam instruments in the last calendar month equaled the amount issued since the scheme was launched in early 2021.
Gam is a market-oriented financial instrument that can be traded in 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. Liquidity is not exchanged between beneficiaries in this manner.
Gam is one of the integral components of the government’s new initiative to implement supply chain finance (SCF). The CBI recently revised guidelines to make the best use of Gam in the SCF scheme.
The SCF program was unveiled by the CBI last January to improve lending efficiency and navigate bank resources toward production sectors, among other things.
The SCF focuses on “credit instruments” rather than direct borrowing, minimizing the diversion of bank resources from flowing into non-productive markets and speculative activities and increase oversight on lending to the production sector.
Qamari-Vafa said Gam facilitates funding for manufactures in noninflationary ways and minimum risk.
“The substantial rise in Gam instruments came after the CBI revised the guidelines.”
As per the revised guidelines, the scope of Gam securities expanded to include both natural and legal entities. Previously, they could be used only for manufacturers and other legal entities.
In addition, the maturity date of the certificates has been extended to 12 months compared to nine months in the past. The minimum maturity period for Gam securities is one month.
Under the new guidelines, owners of the securities have the option to either hold the bonds or sell them to banks or trade them in the stock market. In the past, they could not sell more than a sixth of the nominal value of the bonds.
One of the revised rules pertains to the credit ceiling of bonds. To encourage businesses to use Gam bonds, applicants can borrow credit worth 120% of sales in the last fiscal year of their companies based on their financial statements, albeit after deducting outstanding past loans.
The CBI also eased limits on issuing bonds in the new scheme. In the past, banks could issue 65% of the total Gam bonds to SMEs and the rest to big enterprises.
