Questions About Practices of Private Iraqi Banks

By Omar al-Shaher, for Al-MonitorAny opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

Privately held Iraqi banks have almost entirely relinquished their traditional functions — such as giving out loans, lending credit and issuing letters of credit — due to default risks. Instead, they are resorting to profit making through participation in the currency auction regularly held by the Iraqi Central Bank.

Iraqi banks demand exaggerated guarantees for the granting of any loans to local investors, for fear of defaults on payments. According to banking experts, the value of some loans does not cover more than 40% of the guarantees the privately held banks are demanding, leading to a decrease in the number of loan operations conducted by these banks to a bare minimum.

A lack of local confidence in privately held banks has contributed to their reluctance to enter the market. According to banking expert Dr. Ahmad Brayhi, “Members of the public are depositing their money in government owned banks because they feel that they will honor their commitments towards them.” He also added, “The public does not have much confidence in local banks, which is why it does not trust them with its money.”

Bank brokers affirm that most privately held banks have either closed — or chosen not to open — branches in Iraqi provinces and restrict their activities to their main branches in Baghdad, due to a reluctance to engage in real banking transactions.

Out of a total of 23 privately held banks operating in Iraq, only two are located in the city of Erbil and one in Mosul, whereas 20 are located in Baghdad.

3 Responses to Questions About Practices of Private Iraqi Banks

  1. Fred January 22, 2013 at 2:17 pm #

    Any news on the fate of warka bank ?

  2. herbert swaby June 9, 2013 at 12:35 am #

    why cant the government of Iraq make peace with the sunis tribe and share the wealth and power its the only way I believe peace can come to that country, I hope this government will talk sence into that government.

  3. Ammaral Rubaie June 14, 2013 at 10:44 am #

    The turmoil in Iraq will not calm down by simply and naively making peace with sunny trib…. it is a very complicated issue that needs a major changes to the whole Iraqi Governmental structure and ideology….Besides it is a share business between Politician + Government + People of Iraq + Religious Parties + Neighboring Countries + USA