In Iraqi Kurdistan, locals often trust the local exchange counter more than big banks. But a recent rash of fraud on the informal money market has seen savings lost and attitudes changing.
In Iraq, locals tend not to trust banks, no matter how big. They feel that they may as well hide money under their beds; Iraqi banks are likely to go out of business at any time, they suspect, due to corruption or possibly political changes. So instead, many locals treat the small exchange shops that operate everywhere around the region more like banks.
The same situation applies in Iraqi Kurdistan, where locals are more likely to trust the guy running the small exchange shop on the corner than your average bank teller.
And in recent years, a new form of savings and investment has arisen in the semi-autonomous northern region. Basically, ordinary people would give their money to businesspeople and traders that they knew and trusted in the money markets of their city.
These individuals would invest or otherwise use the money and pay monthly dividends back to the investors. So, for instance, if you gave a local businessperson US$10,000, you might get US$200 back every month until the whole amount had been returned to you. You could claim the whole amount – the US$10,000 for example – back at any stage, if necessary.