30 Percent Leap in Bank Loans
Economy, Business And Markets

30 Percent Leap in Bank Loans

Iranian banks allocated 5,484 trillion rials ($146.2 billion) to various sectors during the fiscal year that ended on March 20, 2017, registering a growth of 1,310 trillion rials ($35 billion) or 31.4% compared to the previous year.
According to the latest report published on the Central Bank of Iran's website, the services sector took the lion's share of all the offered loans at 2,179 trillion rials ($58.1 billion), accounting for 39.7% of all the credits extended to economic sectors.
Industries and mining sector, which received 1,609 trillion rials ($43 billion), and the business sector, bagging 724 trillion rials ($19.3 billion), were the next major recipients of credits, accounting for 29.3% and 13.2% of the total loans, respectively.          

This is while about 500 trillion rials ($13.4 billion), accounting for only 9% of all the loans, ended up in the housing sector, which should come as no surprise given the recession afflicting the key sector.
It is important to note that the growth in banks’ loan portfolios should not raise inflationary pressures since the demand for credit is particularly high.  
Thus, recapitalization of banks, improvement of their efficiency for providing working capital loans for productive activities, reduction of bad debt and redirecting firms to approach the capital market are recommended.
A majority of businesses took out the loans to meet their need for working capital. Working capital loans accounted for 64% of the total credits offered to all sectors, showing an increase of 877.5 trillion rials ($23.5 billion) or 33.3% to reach 3,512 trillion rials ($93.6 billion) year-on-year.  
The document further reports that last year, the share of working capital loans issued to help stimulate the services sector was 1,190 trillion rials ($31.73 billion), which constitute 54.6% of all the credits given to the services sector.
The necessity of bankrolling projects in industries and mines caused the sector to receive 83% of its loans in the form of working capital loans. The figure stood at 1,325 trillion rials ($35.33 billion).
In terms of the number of loans extended during the previous Iranian year, banks had doled out 8,792,387 loans to different sectors of the economy.
As cited in the report, 4,463,215 loans were allocated to the services sector, which is relatively huge compared to the 323,993 loans given to industries and mines. However, the latter benefited more in terms of value by receiving an average of almost 5 billion rials ($133,000) per loan.
The agricultural sector pocketed 1,772,439 loans, but the amount only reached 467 trillion rials ($12.5 billion), or 8.5% of the total loans, whereas the 323,993 loans extended to industries and mines were worth twice the value of loans received by the agricultural sector.

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