Known by its Persian acronym Gam, the new program has been created to help meet the funding needs of “credible and productive” manufacturing units and businesses, Financial Tribune quoted the CBI Governor Abdolnasser Hemmati as saying.
Gam is one of the pivotal CBI moves to assist manufactures in need of recapitalization and to control inflation arising from injecting liquidity to manufacturing companies.
The initiative has been launched with the participation of four banks in the initial stage, namely the state-owned Bank Melli Iran, Bank Mellat, Tejarat Bank and Bank Saderat Iran, the CBI website reported.
Promoting domestic production, curbing inflation and creating conditions for boosting the non-oil economy are among the main objectives of the scheme.
In the view of its architects, the mechanism will enable banks meet the financial needs of manufacturing units without creating “non-productive liquidity”. In other words, it should avoid the inflationary climate new liquidity usually tends to create.
Gam is a market-oriented financial instrument that can be traded in money and capital markets. Lenders will assist credible businesses by offering tradable credit certificates similar to LCs. The certificate can be given to suppliers of raw materials, machinery and equipment.
Like bonds, certificates have maturity dates. The supplier can cash the certificate by selling it in the stock market. Liquidity is not exchanged between beneficiaries in this manner.
CBI says the plan will pave the way to raise working capital for companies with the help of guarantees backed by banks and credit institutions, and by tapping private sector potential.
The scheme procured 600 billion rials ($450,000) in working capital for businesses in the first day and eventually is supposed to provide funds worth 500 trillion rials ($3.8 billion). “The pace of funding will gain momentum in the coming days,” Hemmati said.
Taking stock of measures to help businesses operate in the tough economic conditions, the CBI chief said banks have given 7,500 trillion rials ($57.5 billion) in loans since the beginning of the current fiscal year that ends in March. Working capital loans accounted for 60% of total lending.