Iran launches banking scheme to offer factoring services

March 16, 2023

Iran’s finance ministry (MEAF) has launched a first scheme that allows businesses to use factoring services backed by the country’s banking system.

Finance minister Ehsan Khandouzi unveiled the factoring financing system for small and medium-size enterprises (SMEs) in a ceremony in Tehran on Wednesday.

Factoring is a type of debtor finance where a business sells its receivables or invoices to a third party at a discount to meet its present cash needs.

Khandouzi said launching factoring services is part of a larger government program to enable businesses and state companies to obtain resources they need for projects without relying on finances created by the country’s oil export revenues.

“We hope banks can force their managers to adapt to new (financial) instruments and use factoring services next year,” said the minister as he referred to the calendar year starting late March.

Deputy finance minister Hadi Sobhanian said the MEAF has been pressing banks in Iran to launch factoring services since 2019.

Sobhanian said the new system will help finance SMEs that are unable to offer enough collateral to banks to obtain loans to finish their projects.

He said banks will assign some 1,420 trillion rials ($3.15 billion) to factoring services in the next Iranian calendar year.


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