Economy, Business And Markets

CBI Sees No Constraints on Lending to SMEs

CBI Sees No Constraints on Lending to SMEs CBI Sees No Constraints on Lending to SMEs

Reiterating Central Bank of Iran policy obliging banks to focus on small and medium-sized enterprises by allocating them credits, the governor of the bank says the banking system has no limits in backing the SMEs.

Valiollah Seif referred to the allocation of 160 trillion rials ($ 5.16 billion) to the SMEs and said: “Last year’s data shows 4.1 quadrillion rials ($132.4 billion) was paid to the companies. If we consider 50% of them to be non-restructured, we are left with more than two quadrillion rials.

Banks can allocate the 160 trillion rials in loans to these enterprises using only a tenth of this amount. As such, the banking system has no limitations in giving these loans.”

The CBI in a directive has obligated the banks to do so, he added.

Speaking at a meeting of the Task Force for the Easing and Removing of Barriers to Production in the West Azarbaijan Province, Seif called such meetings a platform for creating mutual understanding between the banks and provincial officials.

“The banking system and production units both have their own problems and they need to come to a mutual understanding regarding the problems of the other side. These task forces have been formed to help identify problems and come up with solutions,” he said.

The CBI chief appealed for speed and efficiency in the operations of the banks, saying they need to define a specific and suitable process through which loans can be given to the SMEs many of whom are buried under high interest rates and low profitability.

“The CBI of its own accord exempted SMEs with a history of troubled credit and a lack of resources from the loan ban” that existed up until last month.

  Creating Momentum

The necessary condition by which loans will be allocated to SMEs, according to Seif, is that the money loaned must create a momentum in the production sector, help it in terms of continuity and longevity and create jobs. “This momentum is created when a product has demand in the market and can create value.”

“The loans must be allocated sufficiently so that they can have the anticipated effect on improving production and creating new jobs,” the governor said.

Reemphasizing the need for a more organized performance by the banking network, he said, “We must witness a visible improvement in the performance of the SMEs by yearend.” The Iranian fiscal ends in March 2017.

Referring to the 44% rise in the allocation of loans in the first three months of the year (ended June 20) in comparison with the same period last year, Seif said: “The injection of loans as working capital for units facing a liquidity problem is the first priority of the CBI.”

Punctuating the need for close oversight over the way loans are allocated, the CBI head reiterated that the banks need to make sure that the companies eligible for credit have indeed reached the production phase and “there is no room for abuse.”