Iranian banks have lent 191 trillion rials ($779.6 million) to 763 startups and knowledge-based companies during the first nine months of the current fiscal year (March 2020).
Based on a recent CBI report, the amount has increased by 128% compared with the same period of last year, Borna reported.
The data show Bank Saderat Iran has loaned 35.3 trillion rials ($144.9 million) in the nine months, the highest amount lent by domestic banks. Bank Mellat with 33.2 trillion rials ($135.5 million) and Bank Melli with 30.5 trillion rials ($124.5 million) followed.
The months ending Dec. 20 and Sept. 21, 2020, were the busiest periods for the banks, with 37.7 trillion rials ($153.9 million) and 30.1 trillion rials ($122.8 million) paid as loans respectively.
Banks paid the least amount, equal to 6.5 trillion rials ($26.57 million), in the first month of the current Iranian year that ended on April 19, 2020.
CBI chief Abdolnasser Hemmati earlier said Iran has over 10,000 startups and knowledge-based companies and if they receive enough support and attention, they will yield valuable results.
Hemmati added that state support for the tech units will continue so as to ensure their constant growth.
“The technology ecosystem is on its way to flourish further and will soon claim a large share of the domestic economy,” he said.
Officials believe the tech firms’ revenues will ease the domestic economy’s dependence on oil incomes.
Extending support to new startups and technology firms has been on the government’s agenda since 2013, when President Hassan Rouhani began his first term in office.
NDFI Resources
In mid-December 2020, the Vice Presidential Office for Science and Technology said it gave 18 trillion rials ($73.46 million) in cheap loans to 166 knowledge-based companies from the resources of the National Development Fund of Iran.
Based on a decree issued by the Leader of Islamic Revolution Ayatollah Seyyed Ali Khamenei, the office is authorized to tap into the sovereign wealth fund to support knowledge-based companies.
Vice President for Science and Technology Sorena Sattari said the loans were taken by companies operating in the agricultural, industrial and mining sectors of rural areas.
“Thanks to the assistance, the companies have made noteworthy progress and grown,” he said without elaboration.
Sattari said the tech ecosystem has high potential for supporting the economy and transforming it into a “smart economy”, albeit with effective government backing.
Besides state support, private companies are also doing their share in funding startups and tech firms.
“Venture capital funds are growing in Iran and becoming popular with investors. This should help underpin the work of startups and help them grow,” he added.
Sattari noted that nine VC funds are now active and the number is expected to grow.
Banks have also helped fund the startups. Hojjatollah Seyyedi, CEO of Bank Saderat Iran, said his bank has lent knowledge-based companies 8 trillion rials ($32.65 million).
“We want to expedite the lending process and also increase the amount. Knowledge-based firms are important and have the potential to help the economy grow,” he said.
Downsides
Some experts believe offering loans is the worst kind of help that can be offered to a fledgling startup or tech company.
Iran E-Commerce Union is against “cash handouts and loans”, rejecting such a policy as the “worst nightmare for Iran’s startup ecosystem”.
Shayan Shalileh, the former secretary of the union, slammed the government-sponsored loans for diverting startups from the right path. “Over time, they will get deep in the red and instead of relying on their own resources and capabilities, they will seek more and more of the same," he said.
Shalileh insisted that instead of loans, the government should focus on taming the bloated bureaucracy, cutting insurance costs for startups and offering tax holidays.
Non-Performing Loans
The authorities' extravagance in "supporting knowledge-based companies" has been repeatedly censured by market observers.
Last February, a report published by the Central Bank of Iran revealed startling data on loans not repaid by knowledge-based companies, raising concerns among experts.
On its website, CBI said unpaid loans of knowledge-based companies until Dec. 21, 2018, amounted to a staggering 70.1 trillion rials ($286 million), of which 18% (13.1 trillion rials/$53.5 million) constitute bad debt.
As the unpaid debt report spread in the social media, many business owners and market observers complained about the issue, lamenting that the never-ending process of getting loans reserved for knowledge-based companies is a disappointing affair.
They demanded clarification about the identity of firms receiving the large loans and the conditions under which banks furnished these loans.
After the CBI report was released, authorities did not respond to calls for revealing the details of these multimillion-dollar loans.
Banks have not updated the volume of unpaid loans ever since.
