The National Development Fund of Iran has provided $3 billion in new credit to banks, head of the NDFI board of directors said on Monday.
“Each bank can allocate up to 10% of the amount it receives from this source to forex-based loans,” Mehdi Ghazanfari was quoted by IBENA as saying.
“Today we witnessed the first contract for a forex-based loan being signed between the Middle East Bank and a private company worth $7 million,” Ghazanfari said.
Applicants of forex-based loans, known as Manaei in Persian, are paid the rial equivalent of forex loans. Borrowers will pay the rial equivalent of installments based on the exchange rates on the payment day.
“The total credit to Middle East Bank is some $300 million, of which it can grant up to $30 million in forex-based loans to companies and projects it deems feasible based on its own assessments.”
Based on a permit issued by the NDFI board, added Ghazanfari, the sovereign wealth fund will also provide funds in rial for forex-based loan contracts.
Ghazanfari asserted that the main mission of the NDFI is to help development or activities that contribute to national development. Lending, he said, is one of the effective instruments of the NDFI to achieve its prime goals.
Referring to past unpaid loans, he said, “The issue of overdue debts is a hindrance. We want loans given to manufactures and projects to be reimbursed [without delay] to be able to fund other production chains.”
Defaulters Warned
Earlier this month, the NDFI Legal and Parliament Affairs deputy warned that the sovereign fund will be taking stringent measures, namely blocking bank accounts and property seizures of borrowers in breach to claim unpaid loans.
“Over the past months debt collection has improved, yet due to the country’s economic and forex conditions, some banks and production units have been unable or unwilling to settle their dues. Therefore, the NDFI has decided to claim its resources via other legal channels,” Fardad Amir Eskandari was quoted as saying.
The accounts of banks with the central bank whose customers have pending loans will be frozen and their assets will be taken as reimbursements, he noted.
If that move does not clear the debt the fund will seize bank shares and of the borrowers and guarantors as well as their collateral, partner with the defaulting company or take full ownership of the project for which loans were taken.
“The NDFI lends to the private sector, cooperatives and non-governmental public economic enterprises through public and private banks. We have no direct contact with borrowers and interact with banks that operate as intermediaries between us and the borrowers. Agent banks assess the credibility of borrowers and are answerable to the NDFI.”
Amir Eskandari said NDFI forex loans are given mostly for projects that have the capacity to export goods or services.
“Due to export constraints we agreed that forex borrowers repay in the national currency at the same rate on the day of reimbursement or with other assets.”
Stressing the need for collecting unpaid loans sooner rather than later, he said, “We hope that with borrowers repaying in a timely manner, NDFI resources can used for new investments and help” cash-strapped companies.
NDFI is independent of the government. It was set up to curb dependency on oil and save a percentage of the earnings from oil/gas export for future generations. The sovereign wealth fund recently said that now it intends to focus more on investment and less on lending. Its board of directors earlier in the year gave the fund the go-ahead to broaden its investment scope.
Win-Win Situation
In an interview with IBENA, Parviz Aqili Kermani, CEO of Middle East Bank, expressed optimism about the NDFI plan of action saying that it will benefit the fund, producers and banks.
"The majority of banks in Iran are commercial banks and not entitled to long-term lending," he said. "There are alternative long-term funding options such as selling bonds, which apparently are not good for new businesses."
Middle East Bank prioritizes lending to export-based firms, Aqili added. "Businesses seeking credit should have a strong structure to be able to meet their financial commitments."
