Banks Ramp Up Lending

The amount was up by 6,774.5 trillion rials ($27b) or 94.3%, according to data released by the Central Bank of Iran. 

As is the norm, loans to boost working capital of manufactures accounted for the lion’s share with 8,374 trillion rials ($33.5b). Working capital loans went to mines, industries, housing, agriculture and the services sector accounting for 60% of the total. 

Working capital credit to business increased by 4,461.5 trillion rials ($17.8b) or a whopping 114% on an annualized basis. 

As always, enterprises involved in mining and industries were the main recipients at 3,096.4 trillion rials ($12.4b) or 37% of total working capital loans.

The steep increase in lending could be ascribed to expansionary monetary policies adopted by the CBI to inject money into the economy at the beginning of the year to mitigate the devastating impact of the coronavirus.

It also is seen in the context of "a general increase in banking resources and loans to brokerage companies in the stock market," the CBI said. 

The central bank was instructed by the government last April to help businesses impacted by the deadly virus that has wiped out entire livelihoods and economies across the globe. The government in Tehran had approved 750 trillion rials ($3b) in financial aid from which 500 trillion rials was in loans to SMEs and the remaining to needy families in the form of interest-free micro credit.  

"Factoring out the covid loans, annual growth in lending could be reduced to 62.6%," the CBI said.  

It also reflects the concern of banking authorities about the viability and survival of clients and manufactures struggling due to the increasing economic challenges.

The CBI has stressed that despite the rise in lending, measures should be taken to curb the inflationary impact from the rising demand for goods. 

Apart from working capital, loans were given for creating and expanding businesses, repair and renovation and first-time home buying.

Banks lent 1,734.2 trillion rials for setting up new businesses, 1,595.4 trillion rials for developing (business units), 348 trillion rials for repair and renovation, 1,200 trillion rials for purchasing goods and 230 trillion rials to homebuyers. Miscellaneous loans amounted to 477 trillion rials during the ten months. 

After working capital loans, establishing new businesses was the second priority with 12.4% and business expansion third at 11.4%. In terms of overall economic sectors, a big portion of banking resources went to the services sector with 4,534.1 trillion rials.   

The next major recipient was industries and mining sector with 4.137.3 trillion rials followed by commerce with 2,517.8 trillion rials. 

As always, agriculture and housing were at the bottom end. Farmers took out 963 trillion rials in loans while homebuyers borrowed 801.7 trillion rials.