The Ministry of Industries, Mining and Trade signed a memorandum of understanding with four banks on Saturday allowing them to issue “Productive Credit Certificates”, known by its Persian acronym Gam, bringing the number of banks equipped with this financial instrument to 17.
The Central Bank of Iran governor, Ali Salehabadi, said that banks issued 336 trillion rials (almost $1 billion) worth of such certificates since it was launched in early 2021.
Gam is a market-oriented financial instrument that can be traded in the money and capital markets. Lenders assist businesses by offering tradable credit certificates similar to LCs. The certificate can be given to suppliers of raw materials, machinery and equipment.
Like bonds, certificates have maturity dates. The supplier can cash the certificate by selling it in the stock market but money is not exchanged.
“Based on the decisions ratified by the government, 20% of the working capital for the production sector should be provided via supply chain finance in the current fiscal year,” Salehabadi was quoted by IBENA as saying.
Gam is one of the integral components of the government’s initiative to implement supply chain finance (SCF). The CBI recently revised guidelines to make optimum use of Gam in the SCF setup.
The SCF program was unveiled by the CBI in January to improve lending efficiency and navigate bank resources toward production.
The SCF focuses on credit instruments rather than direct borrowing, minimizing the diversion of bank resources into non-production and speculative markets, plus improve and expand oversight on lending to manufactures.
Industry minister, Reza Fatemi Amin, said that the SCF is used across the globe, adding that, after the government started using the program a year ago in collaboration with the CBI and the banking system.
