Economy, Business And Markets

Bank Guarantees for Small Businesses Register Growth

Bank Guarantees for Small Businesses Register Growth Bank Guarantees for Small Businesses Register Growth

President Hassan Rouhani has been successful in focusing on small businesses as the volume of bank guarantees in their support has witnessed a significant rise, a report published by the Ministry of Industries, Mining and Trade showed.

As small businesses play an important role in generating jobs, backing these ailing enterprises has been a priority for the current administration by strengthening investment guarantee funds as one of the main ways of doing so.

“Reviewing the performance of the fund to support investment in small businesses from the start of the fiscal March 2013-14 until the end of the previous year (March 20, 2017) shows that many indicators regarding issuance of bank guarantees have had a dramatic growth during the tenure of the current government,” cites the report according to IRNA.

During the aforementioned period, a total of 727 bank guarantees were issued or extended which, in comparison with the period from the start of the previous government (2010) until September 22, 2013, when the number of issued or extended bank guarantee stood at 404, indicate an 80% increase.

At 3.37 trillion rials ($89.8 million), the value of guarantees shows an 85% increase compared to the same period.

In its performance report, the fund has announced that from March 2010 until March 2017, 903 bank guarantees were issued for small businesses with a combined worth of 4.1 trillion rials ($109.3 million), 551 of which worth 2.5 trillion rials ($66.6 million) were issued by the current government.

The government focused on small businesses that were already active when it came to office by issuing 106 counts of guarantees to support development plans in the 42-month period leading to the end of the previous fiscal year. The total worth of these guarantees stood at 418 billion rials ($11.1 million).

The previous administration headed by Mahmoud Ahmadinejad issued 24 guarantees worth 108 billion rials ($2.87 million) during the same period, which shows a 342% growth in the number of guarantees issued and a 287% increase in volume for the Rouhani administration.

 Guarantee Fund Improvement

According to the report, the current administration has also improved the fund’s overall performance during its tenure. In the previous year, 234 guarantees were issued at a total worth of 1.2 trillion rials ($32 million), indicating a 25% and 66% growth respectively in terms of number and volume compared with the year before.

During all the years the fund has been active, it has issued and extended 1,174 counts of guarantees worth 5.3 trillion rials ($141.3 million).

Rouhani’s government has been responsible for generating one-fourth of all these guarantees.

During the previous fiscal year, 31% of guarantees were issued for establishing new businesses, 29% were allocated to working capital, 11% were for development projects, 8% were for the purpose of pre-payment and purchase credit, 9% were issued because of the successful fulfillment of previous commitments and 12% were allocated for participating in tenders.

Bank Sina, Bank of Industry and Mine, Agriculture Bank, Bank Melli, Bank Sepah and Karafarini Omid Fund paid the highest amount of loans through guarantees issued by the fund last year.

According to the CEO of Iran Small Industries and Industrial Parks Organization, bank guarantees are issued to small businesses with a fee of 0.5 -2% and without collaterals for loans up to 5 billion rials ($133,000.).

“These bank guarantees will only be issued by providing checks and promissory notes and the title deed for the place where the project is being executed will be used as guarantee,” Ali Yazdani also told IRNA.


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