Small- and medium-sized enterprises will receive 16 trillion rials ($515.3 million) worth of loans by the time the current fiscal year ends on March 20, said the head of the Monetary and Banking Research Institute.
"The Central Bank of Iran, as part of the Banking Overhaul Plan, has considered 16 trillion rials worth of loans to be allocated to SMEs by the yearend," said Ali Divandari in an interview with IBENA in reference to the milestone plan signed into law by President Hassan Rouhani on July 1.
The official explained that the overhaul plan has unlocked the "frozen" bank assets previously locked in risky investments.
Divandariemphasized that the limited resources of the banking system should not be squandered to bail out the enterprises with infrastructural problems that not only will not be saved, but will also engender further problems for the banks.
"Therefore, these resources must be spent in sectors like the SMEs, in which the repayment of loans is better guaranteed," he said.
By definition, enterprises run by 100 workers or less, and 50 workers or less are considered small- and medium-sized respectively, according to Iran’s Small Industries and Industrial Parks Organization.
In July, it was announced that 96% of the 88,000 licensed Iranian businesses are considered small- and medium-sized.
Ali Yazdani, a deputy minister of industries, mining and trade, had said that 42% of all employees in the industrial sector are working in these enterprises.
Asked about the increase in banks' lending power with the gradual unfreezing of assets as a result of the Banking Overhaul Plan, Divandarisaid when the plan becomes fully operational, the direction of loans will change in a way that corporate financing, which is the main challenge for country's banking system and accounts for most non-performing loans, will be steered toward the capital market.
"Therefore, the responsibility of allocating commercial loans to build factories, refineries and the like will shift toward the bourse and capital market, and the banking system will become more active in giving loans to small- and medium-sized enterprises," he said.
According to Divandari, the implementation of this plan will leave some breathing room for the banks' portfolios and in addition to having a positive effecton liquidity, will boost the return on loans and make the financial statements of banks more transparent.
"The plan will help small- and medium-sized businesses that are mainly overshadowed by major companies when it comes to receiving capital," he said. "So this will pacify public opinion because under this plan, no major economic enterprise that has not registered a suitable output will be injected with huge cash."
The official further said injecting problematic enterprises with capitalmeans there would be no return on the money and opportunities would be missed, because after bankrolling these companies, the banks would find themselves unable to support the SMEs adequately.
Financial help for the SMEs is well-intentioned, but a question pops up about the ability of Iran's capital market.
"Open market and bonds market operations, which are gradually taking form, could prove extremely helpful regarding the matter," he said.
Divandari noted that the liquidity in capital market is adequate for financing big businesses, however bankswill also help the capital market bolster its resources.