Allocation of Loans to SMEs Detailed

As a part of government’s plan to boost small- and medium-sized enterprises through the allocation of credit, since the beginning of the current Iranian fiscal on March 21, Iranian banks have doled out 56.57 trillion rials ($1.34 billion) in loans to 7,346 applicants.

Bank Sepah, Bank Melli Iran and Keshavarzi Bank allocated loans worth 13.53 trillion rials ($322.1 million), 10.25 trillion rials ($244.26 million) and 7.9 trillion rials ($190.1 million) to establish themselves as major lenders to SMEs during the period ending Dec. 3, ISNA reported.

Tejarat Bank, Bank Saderat Iran, Bank of Industry and Mine, Mellat Bank, Refah Bank, Tose’e Ta’avon Bank and Export Development Bank of Iran were the next main loan providers for Iranian SMEs during the period.

While the total number of loan recipients (SMEs and industrial units) during the first nine months of the current fiscal stood at 7,346, more than 3,200 of applicants got their loan from Keshavarzi Bank that doled out the largest number of loans to applicants.  

However, according to the government’s stimulus package, banks were supposed to pay out more than 200 trillion rials ($4.76 billion) worth of loans to more than 10,000 industrial units and another 100 trillion rials ($2.38 billion) to 5,000 SMEs during the current Iranian year (started March 21) but the allocated figure is not even close to what was predicted while only three months are left of this year and banks stop giving out loans in the last months of each fiscal.

The banks’ subpar performance in coming up with the funds to boost SMEs made Governor of the Central Bank of Iran Valiollah Seif to call for stricter supervision over how bank loans are allocated to optimize the process of boosting small- and medium-sized enterprises and their productivity.

According to Seif, the share of finance for working capital in productive businesses has increased to 62.8% in the first seven months of the current fiscal year [ending Oct. 22] from 46% some five years ago.

Figures indicate more than 38,580 industrial units and SMEs have asked for loans since the registration process started in July while almost 17,000 have been introduced to agent banks to get a loan.

By definition, enterprises run by under 50 workers and 100 workers are considered small- and medium-sized respectively, according to Iran’s Small Industries and Industrial Parks Organization.

Manufacturing has been in recession for years as a result of sanctions imposed on the economy over Iran’s nuclear program, among other reasons. The economic restrictions blocked Iran’s access to technologies, machinery and raw materials, thereby increasing costs and reducing demand.

The sanctions were coupled with a sharp fall in the price of oil, Iran’s main source of revenues, in 2014. As a result, the government failed to provide financial support for cash-strapped industries to help them emerge out of recession.

That seems to have changed recently, slowly but steadily, as Iran managed to have the sanctions lifted in January 2016, as part of a nuclear deal it clinched with world powers in 2015, in return for limiting the scope of its nuclear works. This paved the way for an inflow of foreign investments.