Iraqi Banks Struggle with Limited Services and Capital

But much of the private banking activity is limited to deposit services and personal lending. Its two main state banks, Rafidain and Rashid, have a virtual monopoly of most assets. Both are undergoing restructuring to eliminate debt racked up following years of war and economic sanctions, according to Reuters.

Hassoun, whose banking league is an independent organisation to support private banks, said government banks held 87% of the country's deposits while private banks had 13%.

He said state banks' government sector deposits amounted to 30 trillion Iraqi dinars and private sector deposits were at 11 trillion Iraqi dinars. Private banks have 6 trillion Iraqi dinars.

According to Iraq's central bank, there is no law forbidding the private banks from financing government projects whether through loans or through the purchase of government bonds.

The finance ministry two years ago prohibited government institutes from dealing with private banks as a way to curb corruption and misuse of funds, but the central bank considered the move an "injustice" against the private sector, said Mudher Kasim, a central bank advisor.

"The government institutions should have the right to choose the good private bank, but not to boycott all private banks. There are good private banks," Kasim said.

The finance ministry is now in talks to help bring the private banks deeper into the financial system in response to demands from the World Bank and the International Monetary Fund.

One Response to Iraqi Banks Struggle with Limited Services and Capital

  1. LZ 24th July 2011 at 05:21 #

    30 Trillion dinars? There is no way they will RV!