Dierkes Lemke has widened its scope. We are doing research in Iran on a regular basis and enlarge both our network there and our know-how in financing. Our managing partner Dr. Peter Lemke speaks Farsi.
- General remarks regarding finance in Iran
Iran is the classic target market for financing with the backing of an Export Credit Agency (ECA). An ECA is an agency through which a government covers its exporters and banks financing exports against risks on foreign markets. Every exporting country has its own ECA, e.g. the French Government acts through Coface, the Germans through Euler Hermes and the Czechs through EGAP.
So why is Iran so interesting for this financial instrument? Firstly, it is a country with a high risk – according to OECD country risk rating, Iran is listed in the country category 6 (the second worst category). That is why most Western exporters and banks would not consider despatching goods on credit terms or lending money to an Iranian buyer without the cover of their government. Secondly, the market is, despite that, very interesting for exporters as there are many potential buyers of high technology. Thirdly, the Iranian banking market cannot absorb the demand for import finance solutions. Fourthly, for Iranian banks it is very hard to get refinancing in foreign currencies – so they are very interested to take part in ECA-finance.
- General remarks regarding the Iranian banking market
The banking market mostly offers short term financing solutions, i.e. with credit periods up to two years. According to our knowledge, there seems to be a ceiling of four years – at least outside the scope of governmental programs.
The interest rates (banks can work with interest openly – Islamic financing solutions are not necessary) are very high. Even for loans denominating in EUR and financially strong borrowers banks claim double digit rates (with the exception of governmental programs).
- Conclusions for our work
According to our experience there is a strong demand for our services in Iran. There is hardly someone like us with both Western financing knowhow and contacts on the Iranian banking market. Projects are often poorly structured and bear costs as a result of many intermediaries wanting high commissions.
Even in banks one cannot rely on the experience of the employees in the field of import finance. As a result, it is even more important to structure projects from the beginning bearing in mind the criteria of Western banks and ECAs.