chain financing; The initiative of the 13th government to promote production in the conditions of sanctions

According to Iran Economist, financing is one of the most important components necessary for the growth of various sectors of the economy. In the absence of a mechanism to finance various economic sectors, the goal of growth cannot be achieved even with the best conditions in other cases such as technology, human resources, etc. Therefore, financing is considered a vital component in the economy, the improvement of which directly contributes to the growth and prosperity of the economy. This issue has double importance regarding Iran, which has been dealing with unilateral US sanctions for the last decade; Because one of the most important effects of American sanctions has been the hardening of the financing path, especially foreign financing for various sectors of the country’s economy. Therefore, the design of mechanisms for the quantitative and qualitative improvement of domestic financing is extremely important for freeing the various sectors of the country’s economy from the challenge of the lack of working capital, as well as providing capital for the development of the country’s infrastructure.

Chain financing in plain language

Since the beginning of last year and with the beginning of the 13th government, the issue of transformation in the financial mechanisms of the country, especially in the banking sector, with the aim of improving the financing of the real sectors of the economy, was put on the agenda of the government. In this regard, replacing supply chain finance or SCF (Supply Chain Finance) instead of the current traditional financing was considered by the economic authorities of the government. In the mechanism of chain financing, instead of financing all the components of the production chain in the current traditional method, the components of the product production chain can exchange their debt in different components of the chain and solve their transaction needs with an electronic contract between all members and the bank. To put it more clearly, for example, a manufacturer who is a buyer of an intermediate product can receive an electronic bill of exchange by presenting an electronic invoice to the bank, and by presenting this bill to the seller, he can receive an intermediate product. Also, the seller can present this bill of lading to his supplier of raw materials and obtain the raw materials necessary for his production. Finally, the amount stated in the electronic bill is deposited from the bank to the bill holder’s account when it is due (for example, at the end of three months).

Multiple advantages of chain financing

Summary of the function of the chain financing method is to meet the financial needs of the product production chain by clearing the debt of different parts of the chain with each other or granting facilities to only one part of the chain instead of all its components. This function has many important benefits. Due to the reduction of the production chain’s need for facilities in this method, the pressure on the banking network to grant facilities is greatly reduced, and as a result, one of the most important engines of liquidity creation gradually shuts down. Reducing the pressure on the banking network also reduces the risk of the growth of the monetary base from the overdraft area of ​​the banks from the central bank, which also leads to the reduction of the inflationary force in the country. Also, due to the continuous and integrated monitoring of the product supply chain, the possibility of diverting production facilities to unproductive markets such as coins, housing, currency, etc. is eliminated and another factor in inflation is eliminated. In addition, transaction risk is reduced to a minimum in this method, and producers buy and sell with full confidence.

In addition to the above, the institutionalization of the chain financing method has many other important achievements. Directing credit towards production, reducing the total cost of the product, improving the business environment, releasing a large part of the banking network’s facilitation power and providing the possibility of providing huge financing in the productive and vital infrastructure of the country and clarifying the components of the supply chain of various products and As a result of providing the possibility of integrated management of the supply chain for policy makers, it is only a corner of the benefits resulting from the substitution of chain financing instead of the current traditional method of financing.

Production financing despite the embargo

In addition to all the huge achievements mentioned, but perhaps it can be said that the most important achievement of this method is the opening of the production financing channel in the financial crisis caused by the embargo. In a situation where the country suffered serious setbacks during the past years due to the previous government’s passive approach to economic issues and relying solely on the results of negotiations to solve economic issues, including solving the problem of financing production, providing the possibility of financing the production chain is a challenge. It solves an important part of the real economy of the country. Therefore, the development of the chain financing method will eventually provide a large part of the need of various sectors of the economy for financial resources and provide the basis for further growth of the economy.