Tejarat Bank, an Iranian state-run bank, has agreed to pay the Vice Presidential Office for Science and Technology 8 trillion rials ($26.6 million) in aid package to assist the development of startup ecosystem.
Hadi Akhlaqi, the bank's CEO, and Vice President for Science and Technology Sorena Sattari signed the agreement on Monday, ISNA reported.
According to Akhlaqi, the government will contribute 3 trillion rials ($10 million) of the total amount, as part of the 2021-22 budget bill, with the remainder coming from the bank's resources.
As per the agreement, the bank agreed to provide the aid package in the form of low-interest loans, grants and credit guarantees. The vice presidential office is in charge of screening applicants and introducing them to the bank.
According to Akhlaqi, the loan interest rate for applicants in less-developed areas and remote villages will be 10%, while firms in urban areas and metropolises will be charged 12%.
The CEO underlined the bank’s close ties with the vice presidential office and said, "Tejarat Bank has so far paid loans worth 13 trillion rials [$43.3 million] and credit guarantees valued at 34 trillion rials [$113.3 million] to budding startups and knowledge-based companies, through the Iran National Innovation Fund, a vice presidential office's subsidiary."
Akhlaqi noted that none of the loans have become bad debts so far, which indicate that the startups receiving the aid have been successful in their businesses.
According to the official, Tejarat Bank is considering the establishment of tech parks and innovation factories in several metropolises in collaboration with the vice presidential office to further boost the growing tech ecosystem.
Sattari, who also spoke at the event, expressed hope that the current agreement will be efficiently fulfilled, as most fledgling startups need seed money.
The vice president also praised the bank's plan to open tech centers and stated that his office will assist such projects with technological advice and expertise.
Extending support to new startups and technology firms has been on the government’s agenda since 2013.
Officials believe the tech firms’ revenues will ease the domestic economy’s dependence on oil incomes that have been hit by US sanctions.
Banks’ H1 Lending
According to official data, local banks collectively paid 198.9 trillion rials ($663 million) in loans to 857 knowledge-based companies and startups in the first half of the current Iranian year (March 21-Sept. 22).
According to the Central Bank of Iran’s data, private banks, credit institutions, privatized banks and public banks respectively paid the highest amount of financial aid to applicants during the period under review.
CBI said the share of private banks and credit institutions out of the total figure amounted to 91.74 trillion rials ($305.8 million), followed by privatized banks with 77.8 trillion rials ($259.3 million) and state banks with 29.3 trillion rials ($97.6 million).
A closer look at the earlier CBI report shows that the total amount of loans will probably increase compared with last year’s lending.
In April, the bank announced that Iranian banks have lent 321.48 trillion rials ($1.16 billion) to over 800 startups and knowledge-based companies in the last fiscal year (ended March 2021).
CBI chief Ali Salehabadi said Iran has over 10,000 startups and knowledge-based companies and they will yield valuable results if they get adequate support.
“Government support for tech units will continue so as to ensure their constant growth. The technology ecosystem is expected to flourish further and will soon claim a large share of the domestic economy,” he added.
INIF’s Role
The state arm implementing support policies for knowledge-based entities, Iran National Innovation Fund, has provided a variety of assistance to budding and well-developed tech companies and startups.
The fund’s efforts are aimed at increasing the startups’ market value and boosting the country's economic growth.
To this end, INIF signed a multilateral deal with four local banks in early October.
Based on the deal, Bank Saderat Iran, Tejarat Bank, Bank Mellat and Bank Ayandeh agreed to pay loans worth 10 trillion rials ($33.3 million) to startups.
Ali Vahdat, the fund's chief, stated that each applicant company will receive 5 trillion rials ($16.6 million) in lending, depending on their level of development and number of employees.
“Newly-formed and smaller businesses will receive bigger payouts,” he added.
The official emphasized the importance of seed money for fledgling tech enterprises, noting that a positive relationship has formed over the past two years between local banks and the fund, which is offering more integrated financial aid.
According to Vahdat, the fund directly supports 8,000 knowledge-based companies and startups.
Funding Plans
According to the local media, INIF also planned to pay 100 trillion rials ($333.3 million) in loans to fledgling technology firms via the banking system in the current Iranian year (ending March 2022).
Vahdat noted that the amount of allocation has been increasing in recent years, rising from 30 trillion rials ($100 million) in the fiscal 2019-20 to 50 trillion rials ($166.6 million) in the fiscal 2020-21.
This year’s estimated amount was 100% higher than the cumulative loans paid last year.
In an earlier meeting with Bank Saderat Iran CEO Hojjatollah Seydi, Vahdat presented an overview of the fund’s total capital for the current year.
“The National Development Fund, the sovereign wealth fund, is supposed to transfer $200 million to INIF,” Vahdat said, adding that the banking system will also assist the institution by continuing to offer aid packages to budding tech firms.”
Vahdat noted that Bank Saderat's share amounts to 3 trillion rials ($10 million).
Seydi said his bank is ready to extend its share of the loan and hoped that the seed capital will be of assistance to new entrepreneurs and tech companies.
“The bank plans to reduce the loan application process for Tehran-based applicants to seven days and other cities to 30 days, if the required documents are submitted along with their application,” he said.
To relieve the pressure on businesses, Seydi said the financial aid would be paid without any interest.
