Cash Only: Why the Messy Banking Sector Endangers Iraqi Development

The financial sector in Iraq is still in its infancy and a lack of understanding of it, by the political elite and economically illiterate policy makers, has not helped.

Politicians in Iraq keep failing to grasp the importance of this vital part of the economy, a part that could transform the country’s dated economic structure and bring it out of the cash economy and further toward the modern world of finance.

Iraq’s banks were nationalised in the mid-1960s, in line with the government’s nationalist and socialist policies of the time. Before then there had been a privatised banking system. In the early 1990s, former Iraqi leader Saddam Hussein’s regime tried to kick start private banking again but two decades later not much progress has been made.

According to the website of Iraq’s National Investment Commission, the minimum capital required to set up a bank in Iraq is IQD100 billion (around US$85 million). Currently there are 49 banks with licenses to operate – 42 of these are private banks, including 11 Islamic banks and foreign banks. The rest of the licensees are state owned banks like the giant Rasheed and Rafidain banks, which account for the vast majority of banking business in Iraq. There has also been a surge in the numbers of financial and investment firms, with around 40 such licences issued to date.

Interestingly, despite the capital requirement of IQD 100 billion though, some of the private banks have yet to comply with that regulation.

Iraq currently has around one local banking branch for every 60,000 people. Compared to other countries in the region, this is very low: for example, the average in Saudi Arabia is around one branch for every 3,500 citizens. Which means that despite the growth needed in the banking sector and the emergence of many small, boutique-style banks and investment houses, the population still has little, or no, access to banking facilities.

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4 Responses to Cash Only: Why the Messy Banking Sector Endangers Iraqi Development

  1. Uruki-the-Iraqi 3rd March 2012 at 00:54 #

    “Looking around the world, it is clear that a strong banking sector is essential to a successful economy” … This is an absolutely false statement and a mirage reality … Once the World Bank, the IMF and other big financial corporations in London, New York and Tell Aviv (behind them) enter a country, a total monetary collapse follows … We have seen such disastrous results in Greece, Italy, Spain, Portugal, Ireland, Malaysia and many other countries … Iraq must not be manipulated by these so called world financial institutions… Iraq must follow the Chinese financial model, since CHINA is anticipated and posed to become the next super power in 2015 and beyond … Iraq should also keep its finances CLOSED to these international robbers… Iraq MUST oppose ALL foreign interventions in its economy… Iraq must also create a new Iraqi GOLD dinar and force the rest of the world to trade with it instead of trading in Dollars, Euros and British Pounds!!

  2. Jaydee 3rd March 2012 at 10:54 #

    Iraq’s weak currency is killing their economy. I’m inclined to say the Iraqi politicians really don’t care for their people like they lead the world to believe. A boost in currency value would allow the Iraqi citizens to trade and have more buying power. Everyone knows the stronger your currency the more you empower your people, the more folks spend and stimulate the economy. Its a shame what these Iraqi politicians are doing. The U.S. has done what it was suppose to do…it liberated the country. It’s time for Iraq to stop acting like baby’s(that need breast milk).

  3. Stew 3rd March 2012 at 19:59 #

    That’s interesting Jaydee.
    Why does Japan have one of the top economies in the world with a yen rate of about 100:1?
    How did Italy have one of the top economies in the world for years with a Lira valued at 1500:1 prior to them joining the E.U.?
    There are also many coutries at the bottom of the economic ladder that have great exchnage rates. Why is that?

  4. Uruki-the-Iraqi 4th March 2012 at 06:44 #

    Jaydee, it appears that you do not know much about Iraq’s economy or even its history… The Iraqi Dinar was (at one point in TIME) worth 4 Dollars (that is a rate of 1:4)… Iraq is also somewhat a semi-socialist country (Islamic society dictates that), meaning the Iraqi government is STILL the biggest employer of Iraqis in Iraq… The problem of Iraq was the senseless WARS (three successive wars) which depleted Iraq’s national GOLD reserves (currently 5 tons)… Here are some examples: USA (8133 tons), Germany (3396), China (1054), Iran (907), Russia (883), Japan (765), India (557), Saudi Arabia (322), UK (310), Lebanon (286), Algeria (173), Libya (143), Kuwait (79), Jordan (12) and so on… As you can see Iraq stands at the bottom list of gold reserves and small countries such as (Lebanon, Kuwait and Jordan) hold even more GOLD than Iraq, which by the way is larger (in size, population and economy) than these 3 Arab countries combined!!!… As to your suggestion of liberating Iraq, well we also wanted to liberate your (countries and peoples) from BUSH, TONY BLAIR and most definitely the BILDERBERG GROUP … Yes we are babies feeding on breast milk but the million dollar question is “What is it to you?” And what are your babies feeding on then?? BLOOD!!