Subsequently, many officials stepped forward to clarify the role of money and capital markets in facilitating the realization of this goal. “Financing the local companies is how money and capital markets can support Iranian production,” said the CEO of Export Development Bank of Iran and the former chairman of Securities and Exchange Organization, Ali Salehabadi, in an interview with SENA.
Salehabadi noted that with a population of over 80 million, Iran's potential is enticing for every producer but instead of offering this opportunity to foreign producers, local manufacturers must move in to make the best of it.
To have a competitive edge in the global markets, Iranian products need to be both of high quality and affordable. Consequently, they can be exported and only then local consumers can put their trust in the quality of Iranian products, Financial Tribune reported.
To make all this possible, Salehabadi underlined the necessity of providing cheaper resources for local producers. In the budget law of the current Iranian year, more than 1,000 billion rials ($23 million) worth of incentives like subsidy on loans’ interest have been considered for exporting industries. This leads to lower production cost and better price of the products, giving them a competitive advantage.
The capital market has the potential to lighten the overwhelming burden of banks to provide financing by employing huge resources from Iranian mutual funds and attracting investors to fund startups and entrepreneurs. An instance of such efforts was discernible in the recently held International Exhibition of Exchange, Bank and Insurance (FINEX 2018), where capital market officials prepared the ground for fintech startups to present their innovations for venture capitalists and angel investors.
Salehabadi added that the banking system will support small to medium enterprises by providing them with cheap loans.
“EDB provides exporting companies with funds from the National Development Fund of Iran with an 11% interest rate. Another scheme is pooling resources from EDB and NDFI with a 14% interest rate,” the CEO explained.
The bank alone gives loans with 16-18% interest. If the credit rating of the company is high enough, the offered interest rate gets closer to 16%.
Moreover, in accordance with the bylaws of Trade Promotion Organization of Iran, the eligible importing entities are ranked and subject to benefit from up to 6% reduction in their loans’ interest.
For example, if a company gets A rating from the bank and is qualified to use the interest subsidy, they are entitled to receive loans with 10% interest.
Salehabadi concluded that having a well-planned budget law and support from money and capital markets, Iranian producers are bound to provide desirable performance in the current year.