Dissecting the 7,000-Hemat Facilities: What Real Share of Loans Goes to Production?

The 78% share of facilities allocated to production stems more from extending previous debts and deferring non-performing receivables of the banking network than from driving development.

According to Mehr reporter, the statistical reports of the banking system indicate that the volume of granted facilities has exceeded seven thousand thousand billion tomans and more than 78% of this figure has been declared as the share of productive sectors. However, the field image of the production lines is significantly different from the quantitative data of the banking network. Many economic operators and factories are facing a severe liquidity crisis, and this deep gap doubles the need to review the accounting method and the legal nature of the figures recorded in the banks' balance sheets.

Examining the nature of the granted figures shows that the major share of the so-called production support facility is not the result of real money circulation and new liquidity injection. Banks redefine a significant part of customers' outstanding obligations under the heading of providing working capital or assuming past debts in order to avoid the official registration of non-current claims and the decline in the quality of their balance sheets. Although this book registration process is reflected in terms of statistical indicators in the name of supporting the industry and agriculture sector, it does not provide the company with any new financial power to buy raw materials or develop production lines.

Alireza Sadeghi, a banking expert, in an interview with Mehr reporter, stated that an important part of the stunning amount of facilities is basically playing with accounting figures to cover doubtful receivables and not injecting high-powered money into the production body.

He emphasized that when a loan is due and the producer is unable to settle the principal and interest, the bank renews the same debt by applying a penalty and compound interest and puts it under the heading of new facilities, without even a single rial of new resources from the bank's safe entering the real market cycle.

The historical dependence of the banking network on the interest income resulting from the extension of facilities has fueled the formation of the phenomenon of hidden accumulated losses. When a damaged industrial unit is facing fundamental challenges, granting a loan just to settle the previous loan makes the debt of the economic unit exponential and makes the financial burden imposed on it heavier.

On the other hand, another part of the real applicants who need creative investment, modernization of machinery and technology upgrade, are stopped behind the barrier of rationing and balance sheet control of the central bank, because the banks' credit ceilings are already filled with frozen claims.

Referring to the damage of irregular extension of non-current claims, this banking expert clarified that taking on debt without structural restructuring of the company is only delaying bankruptcy and wastes limited national capital. He added that the evaluation of the efficiency of loans should be measured based on tangible output such as gross production, productivity and export capacity, not based on large numbers that merely indicate the handing over of paper obligations between branches and old debtor borrowers.

The deep gap between the creation facilities and formal loans of working capital has created a big obstacle in the way of the entry of new entrepreneurs and the modernization of the country's industrial infrastructure. Facility statistics show that less than twenty percent of paid resources are spent on building new factories or long-term development projects. Such a combination means that a large part of the country's economic base is working with worn-out machinery and energy and labor productivity are experiencing a downward trend, while reports consistently report record-setting financial support for manufacturers.

He said that commercial banks are reluctant to finance long-term construction projects, because the return period of these projects is several years and there are high currency and inflation risks. He explained that in order to comply with short-term liquidity rules, banks prefer to sign one-year contracts and by repeatedly renewing them, they show current claims and recognize imaginary profits, while such a structure directly brings the country's industrial development to a standstill.

In addition to the poor quality of a large part of the registration facilities, the bureaucratic process of payment in the same cases as the creation resources or approved support is determined, also has a very tortuous path. As it has been observed many times in the evaluation of certain support packages, there is a multiple gap between the figures introduced by the executive bodies to the banks and the amounts that are actually deposited into the accounts of the companies. A large part of the cases are stopped due to reasons such as insufficient collateral, defective registration documents or internal inconsistencies of the banks, and the cases waiting for payment for months rot in the cartables.

The issue of time plays a decisive role in the economic life of companies; If the approved liquidity does not reach the production unit on time and in the critical period, managers are forced to retrench, stop lines and bear irreparable losses. Depositing facilities after temporary closure or loss of market share has no structural benefit and only adds the affected company to the list of new bank debtors, without restoring the ability to restore the previous markets and maintain the specialized workforce.

Protection of employment beyond lending

Maintaining the employment capacity and the stability of value chains requires the understanding that banking money does not work miracles alone. Manufacturing companies face challenges such as exchange rate changes, export market instability, domestic demand stagnation, and logistical difficulties, and injecting expensive facilities into a collection that does not have a consumer market will only inflate future debts. Maintaining skilled human resources will be justified and sustainable when the sales cycle of goods and services is established and stable cash flow is obtained from the company's operations.

Seyed Morteza Danshi, a professor of financial management, in examining the pathology of this field, also reminded that if the supply and sales chain is not corrected, a bank loan will only be a temporary accommodation with heavy side effects.

He stated that the policymaker should distinguish between economically justified companies that are caught by temporary impulses and fundamentally unprofitable companies, because the continuation of blind financial support to non-productive units violates the right of creative and progressive companies to access limited credit resources.

Statistical transparency and output-oriented measurement

The solution to get out of this statistical cycle is to move towards full transparency of the use of facilities and change the supervisory approach of the Central Bank. The large figures of several thousand hemmati will have a real economic value when they are reported separately from the book working capital, the renewal of previous loans and the injection of new resources into machinery and infrastructure. In addition, online monitoring systems should be deployed to monitor whether payment resources are actually spent on purchasing inputs and paying labor wages or are diverted to unproductive speculative markets.

It is only by going through statistics and relying on accurate performance indicators such as measuring the active capacity of lines, objectively maintaining employment and reducing exchange costs that one can be sure that the country's banking resources have been circulated in the path of real growth and strengthening of national production bases, instead of serving to hide old imbalances.