A decision has been made and the resources are available for raising the ceiling of usury-free loans to small businesses but the necessary permission from the CBI is lacking, the CEO of Mehr Iran Qarzol-Hasane Bank said Sunday.
Siamak Dolati expressed the willingness of the bank to “raise interest-free loan ceiling to 200 million rials ($ 6,600 dollars) from the present 150 million rials ($ 5,000 dollars) that was decided years ago,” he told the media, ISNA reported.
The proposal by the relatively new and small-time lender has been sent to the CBI to which it has yet not responded. In recent months big and small banks have shied away from lending for more reasons than one. The liquidity crunch and piling up non-performing loans are said to the primary reasons behind the dry season in lending.
Current loans of up to 150 million rials “are enough for small needs and hence the conditions should change in a manner that will make it possible to increase lending to 200 million rials and thus help boost small enterprises,” he said without elaboration.
However, Dolati did not say how a meager 50 million rials could make a meaningful difference in improving small businesses. The bank needs to consider a mechanism to ensure that the proposed 200 million rials loan would be a tool for development (however small) and not a means of promoting consumption.
Plans for attracting deposits, expanding services such as warranty, opening L/Cs and also foreign currency accounts have been discussed by the bank with the Ministry of Economy and Central Bank of Iran.
Irrespective of the resources needed for interest-free loans, target groups eligible for soft loans should be identified given the success of microfinance in developing countries to help augment small entrepreneurs and alleviate poverty. Such lending can and should provide opportunities for small businesses that lack stable payrolls and/or collateral to qualify for conventional loans at prohibitive interest rates.
