Economy, Business And Markets
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88% of Loans Paid as Industrial Working Capital

88% of Loans Paid as Industrial Working Capital88% of Loans Paid as Industrial Working Capital

Banks doled out 934 trillion rials ($30 billion at market exchange rate) to various economic sectors in the three months ending June 20, with the industry and mining sector grabbing 30% of the total.

The banking sector’s Q1 lending report, published by the Central Bank of Iran on Tuesday, marks a year-on-year growth of 44.1% in business lending.

The report indicates that 632.8 trillion rials ($20.3 billion) or 67.8% of the loans were allocated for meeting businesses’ need for working capital. Injection of working capital accounted for 88.7% of the total loans paid to industrial units and mines.

Some 73.6% of the loans to the trade sector was also used to prop up the businesses in need of working capital.

Services continue to be the top receivers of bank loans and took out 398.8 trillion rials ($12.8 billion) or 44% of total loans during the quarter. Commerce and trade sector, as well as housing and construction sector, accounted for about 13% and 8% of the loans, respectively.  

CBI's data also show that 8.1% of the bank credits were used for startup loans, while 4.1% of them were aimed at helping borrowers develop their businesses.

It seems that more people are eager to start a business in the agriculture sector, as the number of startup loans distributed in the sector was 14.3% higher than the others.

Startup loans accounted for 5% and 4.2% of the loans paid to industry and commerce sectors, respectively.

The government had earlier announced plans to allocate 160 trillion rials ($5.1 billion) to help 7,500 semi-closed production units. The Ministry of Industries, Mining and Trade announced that by July 22 the struggling manufacturers can approach banks for up to $970,000 in new credits. The manufacturing sector has rarely been in a worst state than it is now: 60% of the country's SMEs are facing closure, according to Ali Yazadani, managing director of Iran Small Industries and Industrial Parks Organization. Some 1,502 manufacturing units have been foreclosed by the lenders, 25% of which have shut down and the remainder are punching well below their weight. However some believe that pushing banks to lend more may seem a convenient short-term strategy to bail out struggling SMEs, in the long run it will prove to be a replay of past mistakes–ignoring the writing on the wall that demands meaningful reforms for improving the business landscape

 

 

Financialtribune.com