TEHRAN - Industry, Mining, and Trade Ministry has signed a memorandum of understanding (MOU) with five acting banks to collaborate on implementing a supply chain financing plan to provide facilities to production units across the country.

The MOU was signed on Monday, in a ceremony attended by Industry, Mining, and Trade Minister Reza Fatemi Amin, the portal of the ministry Shata reported.

Speaking in the mentioned ceremony, Fatemi-Amin underlined the significance of the chain financing plan and noted that the country’s banking system has had very positive cooperation with the ministry in implementing this project.

"This plan started from the beginning of [the Iranian calendar month of] Khordad (May 22, 2021), and since then we have held meetings every week to monitor and supervise the progress of the plan,” the minister said.

The official pointed to the ease of access to resources, liquidity management, and reduction of diversion of resources from productive sectors as the advantages of the mentioned plan.

Back in January, the Central Bank of Iran (CBI) and the Industry, Mining and Trade Ministry signed a memorandum of understanding (MOU) with seven acting banks to collaborate on implementing the supply chain financing plan.

The MOU was signed on January 1, in a ceremony attended by Fatemi Amin, CBI Governor Ali Saleh-Abadi, and Finance and Economic Affairs Minister Ehsan Khandouzi.

Under the framework of the mentioned MOU, CBI and the Industry Ministry would cooperate with the acting banks to provide facilities to production units in various sectors including metals, construction, automobiles, home appliances, machinery, foodstuff, as well as chemical and petrochemical industries.

Unlike traditional methods of providing direct facilities by financial institutions, supply chain financing is a form of financial transaction wherein a third party facilitates an exchange by financing the supplier on the customer's behalf.

Also, it refers to the techniques and practices used by banks and other financial institutions to manage the capital invested into the supply chain and reduce the risk for the parties involved.

In this method, the production units can also receive other credit instruments such as bonds and negotiable instruments instead of cash facilities, which in addition to reducing the need for liquidity, bank resources are also directed to productive activities.

EF/MA