Iranian banks have been instructed by the Minister of Economy to accelerate extending loans to technology firms and startups, EcoIran reported on January 22.

The minister's directive obliges banks and credit institutions to accelerate the allocation of affordable loans to knowledge-based firms and startups. Financing tech companies is a mandatory lending requirement for banks, and they are expected to extend these loans at lower interest rates. The Iranian government, recognizing the potential for job creation in the tech sector, has expressed interest in supporting knowledge-based companies.

To ensure compliance with the directive, Minister Ehsan Khandouzi has set a deadline for leaders to meet the timeline for the allocation of loans.

Central Bank of Iran figures reveal that banks paid IRR1,795 trillion ($3.3bn) to knowledge-based companies in the first three quarters of the fiscal year beginning in March 2023. This figure represents a 58% increase compared to the same period the previous year.

In the last fiscal year, total loans to knowledge-based firms amounted to IRR1,772 trillion ($3.4bn), marking a 165% increase compared to the year before.

Iran is home to an estimated 7,000 knowledge-based companies and 1,600 startups.

For the fiscal year 2023-24, banks have been directed to allocate up to IRR2,000 trillion ($3.8bn) in interest-free lending for government-led programs, including loans for newlyweds, childbirth, and support for households grappling with the escalating cost of living crisis.

While market observers generally support bolstering the knowledge economy, some have raised concerns about the government compelling banks to finance tech companies. Despite improving ties between lenders and startups in recent years, banks prefer to adhere to their own criteria for loan eligibility and interest rates.

Data from the Central Bank of Iran indicates that private banks appear keen to finance knowledge-based companies, collectively allocating 84.3% of the total loans to startups in the nine months to December 21. Private lenders recorded a notable 168.2% growth in loans to such firms.