In other words, support for SMEs could enhance the accumulation of savings in the economy and aid the raising of capital by entrepreneurs, thus paving the way for the kind of investments that could create new job opportunities. More importantly, in the long run, this shift would pave the way for better income distribution in society.
According to the Islamic Parliament Research Center, support for SMEs could ultimately lead to decentralization of industry, which at present is to a significant extent concentrated in the greater Tehran region. On a grander scale, this could aid the government’s objective of creating job opportunities and driving economic growth in deprived regions of the country.
In this vein, the Rouhani administration and the Central Bank of Iran’s decision to recently cut the interest rate to 18% in parallel with the raising of banks’ lending capacity to SMEs are other calculated measures to revive this important sector of the Iranian economy. This is particularly noteworthy given that 72% of bank loans have until now been extended to the top decile of companies in terms of existing company capital.
The Research Center also recommends that a market dedicated to SMEs is an appropriate measure to boost such enterprises’ access to financing. As such, the impending launch of precisely such a market by the smaller Iran Fara Bourse is an important and welcome step, as the admission requirements of the Fara Bourse are lesser than the larger Tehran Stock Exchange.
Indeed, with the launch of an SME-focused market and more available and affordable financing from banks, Iran may finally see a revival among its small- and medium-sized enterprises.