Iraqi Banking’s Great Leap Forward

Last month the Central Bank of Iraq co-hosted a conference with USAID’s Iraq Financial Development Project on “Integrating the Banking and Financial Services Sector in Iraq.” This event, which was held in Istanbul from November 18-19 covered two upcoming changes to the payments system that have the potential to revolutionize Iraq’s banking sector.

The first is the introduction of a “national switch” for processing credit card and ATM transactions. The switch—essentially a router and some specialized software—will connect all of Iraq’s ATM machines and credit card point-of-sale scanners to a common platform. At present, each card-issuing bank operates its own system. Because not every point of sale is connected to every system, no one card will work everywhere. Little wonder that almost everything is paid for in cash.

The second is the establishment of the Iraq Interoperable Mobile Payments System (IIMPS). This system will reach out to people who do not have a bank account by making it possible to bank by mobile phone. Users will open accounts by calling a number and speaking with a representative. They may then make cash deposits and withdrawals either at branches or at venues such as retail shops that the banks will designate as their agents. Making a payment will require nothing more than a phone call to transfer funds to the payee's account. There will no longer be any need to pay for anything with “blocks” of hundred dollar bills.

Both systems are supposed to begin operations in 2013. Of the two, the mobile system seems particularly promising. Even with the national switch in place, merchants may be reluctant to accept credit cards because of the associated fees and the paper trail they leave for the tax authorities. The IIMPS, however, should be readily adopted by anyone with a mobile phone. That’s a lot of potential new customers for the banks. By an interesting coincidence, it turns out that mobile phone users and people without bank accounts both account for about 80% of the Iraqi population.

7 Responses to Iraqi Banking’s Great Leap Forward

  1. tahir 2nd December 2011 at 19:21 #


  2. Positive 3rd December 2011 at 02:50 #

    Nothing better then reading about the tremendous future Iraq has. It just keeps moving forward. Love it.

  3. PS 7th January 2012 at 22:56 #

    THank you for the information. Can you advise the status of the revalue of the Dinar? I am sure you are aware of all the get rich quick rumors. Pleae provide some insight.


  4. scott 9th January 2012 at 05:53 #

    whats up with the dinar?

  5. DeWeaver 9th January 2012 at 19:21 #

    PS and Scott:

    I'm afraid I don't have anything to add on the dinar beyond what I wrote in this post:

  6. Dr S 24th February 2012 at 21:42 #

    Dr DeWeaver,
    We are all aware of the 'get rich quick' scenario surrounding the Dinar. While that is unrealistic, one possible outcome is a restructuring of the Iraqi monetary system. What have officials had to say about a complete overhaul, with exchange to a new currency? I read in an Arabic website (through Google translator) about this possibility being raised by the governor of the CBI.

  7. DeWeaver 24th February 2012 at 22:01 #

    Dr S: I believe they have announced that they will start exchanging old dinars for new ones in September with 1,000 old dinars being exchanged for 1 new dinar. The exchange rate should adjust from USD 1 = IQD 1166 to USD 1 = IQD 1.166 so that the value of your new dinar holding in USD will be the same as the original value of your old dinars. If you started with 1,000 old dinars worth USD 1.166 you'd end up with 1 new dinar also worth 1.166.