TEHRAN: Governor of the Central Bank of Iran Valiollah Seif in a letter called on the chief executives of banks to prioritize financing small- and medium-sized enterprises in the current Iranian year (ending March 20, 2018) as they did last year. “Today, supporting SMEs is one of the main priorities to boost economic growth and development in many countries, because of the significant role they play in creating jobs and preparing the ground for innovation,” Seif wrote in his missive reported by CBI’s official news website. The head of Money and Credit Council–a policy-making committee– commended the performance of banking system for supporting businesses last year, asking them to follow it with more of the same this year. During the previous fiscal year to March 20, 2017, a total of 24,232 production enterprises received more than 170 trillion rials ($4.5 billion) worth of loans from lenders as part of the banking system’s efforts to revitalize the beleaguered production sector.
Bank credits in support of industries are flowing, as leading businesspeople and pundits have rooted for fundamental reforms such as improving the business climate and overhauling the tax system as a more sustainable way of addressing production woes than mere cash injection. Seif notes that since the ease with which an SME can be established is one of the criteria in gauging the climate of doing business in a country and since their role in the economy and in bolstering bigger businesses cannot be ignored, supporting them has become a necessity. Because SMEs are dispersed in all provinces throughout the country and all regions are able to enjoy the loans, “financing them will entail an optimized distribution of the limited resources of banking system and a balanced development of wages and employment”. In early June, the central bank notified the lending priorities of the banking system for the current fiscal year, announcing that a total of 300 trillion rials ($8 billion) has been earmarked and SMEs have been prioritized to receive loans. It has been decreed that 10,000 businesses and 6,000 unfinished projects with a physical progress of at least 60% will receive funds while 5,000 business units will be renovated. In his missive to bank CEOs, Seif also referred to the performance of lenders in the previous years and said the banking system has done its duty in line with the policies of the administration.
According to the top official whose five-year mandate at the bank will end next year, from the more than 24,000 SMEs that received loans last year, the Ministry of Industries, Mining and Trade directly monitored 6,271 businesses and came to the conclusion that 2,154 of them created 10,073 jobs and 2,073 of them registered growth in production. Seif noted that CBI now aims to continue to support economic projects within the framework of Resistance Economy and strives to “institutionalize this trend in the economy” by directing the banks to play a sustained and effective role in supporting manufacturing projects. The top official at the central bank also pointed to oil and non-oil economic growth in the previous fiscal year, adding that while oil-dependent growth accounted for a notable portion of total GDP growth [during the fiscal 2016-17], non-oil growth also registered a commendable increase. “Non-oil growth rose from a 3.1% contraction two years ago to 3.3% expansion last year, which indicates a rise in dynamism in non-oil sectors,” he said, adding that with the continuity of strong support for SMEs in the current fiscal year, growth will continue. However, the CBI governor admitted that a review of the performance of lenders in the first four months of the current fiscal year (March 21-July 22) in allocating loans to small- and medium-sized businesses indicates a lackluster record. “In spite of a shortage of assets and credit crunch and in order to make up for lost time, reviewing the [loan] applications of SMEs is facilitated and processed in the shortest time possible,” he said. In conclusion, Seif called on the banks to submit weekly reports on their performance in backing the ailing SMEs.