Loans to SMEs Top $4b in 11 Months

EghtesadOnline: The government granted loans worth 156.8 trillion rials ($4.1 billion) to 22,893 small- and medium-sized enterprises in the 11 months to February 18, 2017.

News ID: ۷۷۴۱۶۲

25 February 2017

The loans are part of a government plan to provide struggling SMEs with a total of 160 trillion rials ($4.2 billion) this year to stimulate the industrial sector, which has been grappling with a deep recession in the past few years, Shata news agency, affiliated to the Ministry of Industries, Mining and Trade, reported.

Most of the loans were given to SMEs in Mazandaran Province (987 businesses), Isfahan Province (965 businesses) and Gilan Province (768 businesses).

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

According to Financial Tribune, some 96% of all the licensed Iranian businesses are considered small- and medium-sized. About 88,000 manufacturing units are active in 992 industrial parks across Iran, accounting for 42% of all employment in the industrial sector.

According to ISIPO Chairman Ali Yazdani, the current Iranian administration has allocated 87.9 trillion rials ($2.3 billion) to 8,743 new industrial units to start business, creating 151,000 jobs. These were part of 12,469 requests for facilities to start an enterprise.

Manufacturing has been in recession as a result of sanctions imposed for years 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 earlier in 2015, in return for limiting the scope of its nuclear works. This paved the way for an inflow of foreign investment.

Industrial parks attracted $1.84 billion in foreign direct investment since 2013, of which $653 million have been invested after the implementation of the nuclear deal.

Foreign investors have signed 47 contracts to establish small- and medium-sized enterprises, creating 2,740 jobs. The contracts have been signed by Turkey, Azerbaijan, Ireland, Japan, Iraq, Afghanistan, Croatia, China, Germany, France, Turkmenistan and the UAE.

According to Gholamreza Soleimani, the deputy head of ISIPO, Iran has defined 160 projects in industrial parks in need of an aggregate of 3.85 billion worth of FDIs.

Seven of the 47 contracts have been signed since the removal of sanctions. Of all the agreements, 25 projects have become operational.

Early January, Deputy Minister of Industries, Mining and Trade Reza Rahmani said more than 20,000 industrial units had emerged from recession since the beginning of the current Iranian year (March 20, 2016).

Sonya Pouryamin, an advisor to industries minister, said the government has also helped revive factories whose production had come to a halt.

“With the support of the incumbent administration, 3,319 shuttered industrial units have come back on track,” she was quoted as saying earlier this year.

Iran’s industrial sector saw the highest growth of 9.1% in the first six months of the current fiscal year (started March 20, 2016) among other economic sectors of Iran, according to the Statistical Center of Iran.