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Iran to Shift Agricultural Capital raising from Bank-Oriented toward Capital Oriented
2020/03/02

by H.shirzad[i] 

Providing sufficient and in-time financial resources for the agriculture sector should be the motivate power at the sanction time. Iran agricultural sector has been traditionally used to fundraising through banking systems (especial agriculture bank, 74%), however, during the recent years, some banks and credit institutions tend to supply financial facilities for the agricultural sector including Post bank, Omid entrepreneurship fund, Iranian rural cooperative fund, Supporting Fund for Agricultural Invest(SFAI), and Gharz-o-Alhasaneh.

Notwithstanding, the capital market has achieved to gain the second source of fundraising at the national macro-economy through the facilitation of the Rules and Regulations as well as the publication of the binding bounds, percentage stocks during the last decade. Unfortunately, the agricultural sector has not been able to gain the concept of "from bean to the shelf" because of a lack of supportive infrastructural facilities, efficient capital raising corporations, lack of financial and know-how.

From among 326 Iranian corporations that are active in the stock exchange, there are few upstream and downstream agricultural companies.

Currently, the agriculture sector has been accessing the Islamic financial tools including (partnership, bailment of a capital, contract for the agricultural purpose and percentage, debt and renting). These tools could provide a great opportunity for the public and private sector including the mangers of the agricultural supply chain, investors and agriculture ministry. Regrettably, from among contacts, only Mozarebeh and renting have been extensively applied by Iranian banks. The interesting point is that the extensive application of the abovementioned Islamic financial tools will lead to the fair distribution of agricultural sector risks among different stakeholders including farmers and shareholders. Therefore, the income between different deciles of the agricultural chain will be fairly balanced. The policymakers of the financial sectors should shift their strategies from the banking system toward tock-oriented. In such a system, the shareholders can enjoy their share interest, while they will be able to enjoy the benefits of the value raising of the farms and crops. However, this system should be supported by policymakers, credit institutions, public and private organizations. Allocating an insufficient budget for the agricultural sector along within the efficient banking system should be assumed as an alarm for the managers. The crisis such as crop overproduction including tomato, cucumber, garlic, and saffron only is removed by applying a supportive mechanisms including on-time purchasing with a guarantee and supportive prices. Nowadays, the crisis of crop overproduction has afflicted the other crops, thereupon the banking system will not be effective by itself. The financial indicators like yield and risk indexes should be pre-calculated and applied by these systems to control the crisis of crop overproduction. Gaining acceptable marginal benefits for the agricultural business requires adopting appropriate policies that support the agricultural value chain accompanied by the publication of the stocks and applying domesticated patterns of the contract farming.   Gaining acceptable marginal benefits for the agricultural business requires adopting appropriate policies that support the agricultural value chain accompanied by the publication of the stocks and applying domesticated patterns of the contract farming.

The CORC experience in 2018 and 2019 provides evidence that the banking system by itself is not sufficient for solving agricultural financial problems. Applying the different financial resources and tools to publish stock bounds in the stock exchange market will surely pave the way for sustainable fundraising for the agricultural sector.



H.Shirzad is the Deputy Minister of the Agriculture-Jihad and CEO of the Central Organization for Rural Cooperatives of Iran (CORC)[i]

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