Economy, Business And Markets

Manufacturers Heavily Reliant on Banks

Manufacturers Heavily Reliant on BanksManufacturers Heavily Reliant on Banks

Nearly 90 percent of manufacturing units rely on banks’s financial assistance to address their cash flow needs, an official with Iran’s chamber of commerce said.    

Khosro Forooghan Geransayeh, head of chamber’s trade committee, criticized the high rate of interest rate -- 25 to 30 percent -- on loans offered to businesses.

“Given high expenses, manufacturing units fail to compete with imported goods and may go bankrupt,” ISNA quoted him as saying.  

If the government aims to exit recession, it should support the manufacturing sector, he said.  

Nearly 50 percent of manufacturing units are not operating now due to economic hardships and many of them are shut down. Others which still operate utilize a small part of their capacity.

It is clear that manufacturing must be supported and loans need to be provided within this sector, the official said. “In addition to clarifying the structure of manufacturing, governmental plans for providing cash flow also need to be laid bare.”

Either the government plans to provide subsidies for the manufacturing sector or to finance banks and mandate them to do the same in manufacturing units.

The second scenario would not prove effective as insolvency issues shall only deteriorate and debts to the banking system would surge.

For actually putting the manufacturing sector into motion, other problems rather than banking issues (labor law for instance) must also receive attention, Geransayeh said.