The Omid Entrepreneurship Fund will create special funds to support specific industries next year, Asghar Nurolahzade, the CEO said.
“We will work with unions and business leaders in order to first determine the parameters of the funds and then announce their establishment,” he was quoted as saying by ILNA.
It was not clear which companies and industries would be eligible for the new loans. Banks and lending institutions, crumbling under the burden of soured loans, stressed assets and restructured loans have choked off credit to companies leading to the credit crunch inhibiting key manufactures in almost all sectors of the recession-hit economy .
The specialized funds will not be state-controlled, he said. “At least 51% of the new funds’ capital will be provided by stakeholders in that particular field and the rest will be provided by the OEF.”
Nurolahzade said the funds will be accessible only to members and shareholders.
Omid Entrepreneurship Fund is a fund for supporting entrepreneurship and small and medium enterprises. It was formerly called Imam Reza Mehr Fund. The name change came after President Hassan Rouhani came to power in 2013.
As of now, the fund’s loans are mostly for the less developed and rural areas plus small towns deprived of credit from banks. “We lend to small and newly-established businesses in the manufacturing and services sectors,” says the head of the lending institution.
A line of credit worth $250 million will be opened in the National Development Fund of Iran for the OEF. “This will double our lending power in supporting businesses.”
Nurolahzade stated that the fund created 50,000 jobs in the current calendar year (ends March 19). The fund has given loans to the tune of $397.6 million in this fiscal year.
Single Currency Rate
Nurolahzade was of the opinion that the dual exchange rate is a breeding ground for rent-seeking by some production units.
“Some domestic manufacturers receive foreign currency at subsidized rates for importing raw material and sell it in the free market,” he complained.
Based on the dual forex rate system, which the country adopted in 2012 after the international sanctions were tightened, businesses considered “vital” to the economy receive hard currency at subsidized rates while other non-essential businesses should meet their forex needs from the parallel market.
“Unifying forex rates will help improve transparency in the domestic economy,” he said.
The official recommended, however, that unifying forex rates be carried out gradually and not abruptly and based on a determined time frame. He opined that the process of unifying forex rates could take a little more than six months—something predicted by other senior monetary and economic officials.
“A single rate could trigger a big shock for the economy. So we should be very careful in the way we execute the scheme,” Nurolahzade said.
The single currency rate could be a big boon for Iran’s exports, he said, and added that even a surge in the exchange rates would benefit domestic exports. “This would translate into lower cost prices for our exportable goods that will obviously benefit the exporters.”
