Stimulus Plan for SMEs

EghtesadOnline: A joint meeting of the Money and Capital Markets Commission and the Industries Commission of Iran Chamber of Commerce, Industries, Mines and Agriculture was held on Sunday to discuss the much-touted government scheme to allocate 160 trillion rials ($5.24 billion) to 7,500 struggling industrial and agricultural SMEs.

News ID: ۷۳۷۱۸۳

26 September 2016

The meeting, which also was attended by representatives of the Central Bank of Iran and the Ministry of Industries, Mines and Trade, sought to explore ways of boosting the plan's efficiency and give private-sector leaders a chance to air their complaints.

Farshad Moqimi, the planning deputy of Iran Small industries and Industrial Parks Organization, announced that of the 57,000 production units that had applied for the loans, 4,355 ones have received loans amounting to 30.4 trillion rials ($1 billion).

Moqimi added that the scheme also aimed to foster competition in the industrial sector.

The stimulus package was announced by the government at the beginning of the year in March as part of broad efforts to fight a long-running recession and prop up weak demand in the economy.

The manufacturing sector has rarely been in a worst state than it is now: 60% of the country's SMEs are facing closure, according to Ali Yazdani, managing director of ISIPO.

Some 1,502 manufacturing units have been foreclosed by the lenders, 25% of which have shut down and the rest are punching well below their weight.

Controversial and Popular

The plan, however, has proved as controversial as popular. The government, for one, has been cautious not to let the plan smear its reputation in upholding monetary discipline.

CBI Chief Valiollah Seif made it clear that the credits will come from the banking resources and put a restraint on them.

Mohammad Reza Qorbani, CBI's credit manager, argued that since banks had doled out some 4.1 quadrillion rials in the previous year and assuming that half the amount was restructured debt, lenders  are able to extend half of that amount (2 quadrillion rials) in new loans this year.

"So we argued that if we only direct 10% of this figure to SMEs, we can guarantee 160 trillion rials for them," he said.

The ultimate aim of the plan has been to breathe new life to recession-hit industrial units, which are certain to get back on their feet with a shot in their arm.

The Ministry of Industries later agreed to include agricultural enterprises in the scheme as well.

Qorbani emphasized that bank lending won't be limited to this figure and lenders will continue to allocate capital to all creditworthy companies.

Irregularities & Complaints

Discrepancies in statistics, lack of a unified approach in the banking system, overly strict conditions put forward by some banks and high interest rates were some of the issues over which private businesses took the authorities to task at Sunday's meeting, reports Financial Tribune.

As for the statistics, the CBI's data sharply contrast with those of the Industries Ministry.

According to Qorbani, 9,992 units have received 70.6 trillion rials ($2.4 billion) and the difference accounted for the fact that CBI also added SME loans granted outside the stimulus package.

Stating that the main business of the country, including the banking system, should be to promote production, Kourosh Parvizian, chairman of ICCIMA's Money and Capital Commission, asked the authorities to adjust their statistics and called on banks to reform their accrediting process, abide by CBI's rules and reduce red tape.

Other demands centered on the fact that the banking system should prioritize truly private enterprises in allocating its credits and that lenders stop integrating their debt restructuring as part of the new loans to ailing SMEs.

Parvizian pledged to implement the plan robustly and counter any violations and disruptions that might occur.