Cash only .. Banking sector in chaotic Iraq

[carlablum]

Cash only .. Banking sector in chaotic Iraq

01-03-2012 | (Voice of Iraq)

More than three-quarters of Iraqis do not have bank accounts and do not trust banks, and handle the amounts of cash, including carrying large packages with them wherever they stayed for the conduct of their daily lives is what makes the issue of the existence of a modern banking sector is essential for the development of the country.

The banking sector in Iraq reflects the economic chaos prevailing in the country, the basic practices of modern banking, such as electronic transfer of funds to pay salaries or meet the needs of other banking almost non-existent credit facilities and elusive, but ATM machines are just not up to the invention after Iraq.

A small number of banks in Iraq have the ability to transfer funds electronically, and the number of branches in a position to do so shall not exceed 240 branches, conversion of funds to Iraqi banks directly process is still not organized and often carried out through other banks in the region, such as banks in Jordan or the UAE.

Latest research conducted in this area indicates that 80 percent of Iraqis do not have bank accounts and they can not obtain such accounts, and public confidence in the Iraqi banking sector is still low, and most banks in Iraq are working example venture deposits safe and frozen.

Iraq began walking down the path makes it one of the richest countries in the world, being a country that is ranked fourth globally in terms of oil reserves and the possibility to become one of the largest exporters of oil in the world.

Vantegh may double in the future to up to the amount of production by Saudi Arabia which is currently one of the largest oil-exporting countries in the world, or it may exceed a little too, but in spite of the income and growth potential remains the economic progress has been slow and the disruption of the banking sector and one of the reasons for this slow.

In spite of talk about reform of the sector and put forward a new electronic banking systems is that this vital sector is still largely underdeveloped.

The financial sector in Iraq is still in its infancy, and lack of understanding of this sector by the political elite and policy makers "economically illiterate", it is the things that impede the development of this sector. Politicians in Iraq did not realize until today the importance of this vital sector of the economy, a sector that can turn the old economic structure of the country and leads them out of the cash-based economy towards the world of modern finance.

Nationalization of Iraqi banks were in the mid-sixties of the last century, in line with the policies of the national government and the slogans of socialism at the time, and before that there was a banking system privatized, and in the early nineties of the last century, try the regime of PresidentSaddam Hussein to start from a new service private banking, but Athakik not a lot of progress after two decades.

According to the website of the Iraqi National Investment Commission, the minimum to establish a bank in Iraq up to the (100 billion Iraqi dinars (ie up to (85 million U.S.), there are currently 49 banks have licenses to operate, including 42 private banks, including 11 Islamic bank and foreign banks.

The rest of the licenses they are state-owned banks such as Rafidain and Rasheed bank giants, and the monopoly which the vast majority of the banking business in Iraq.

The number of financial companies and investment are also seen an increase in the number after the issuance of a license for about 40 of these companies have been allowed to work in Iraq today.

Ratio of banks to the number of people in Iraq up to the branch of a bank, one for each 60,000 people, compared with other countries in the region, this number is too low, for example, the average number of branches in the Kingdom of Saudi Arabia is one branch per 3500 inhabitants.

Despite the growth needed in the banking sector, and the emergence of many small banks and investment houses, but the population's access to banks is still limited or non-existent.

Most Iraqis rely on relatives and friends to borrow money, but it is clear that this dependence is caused social problems as a result the differences resulting from non-payment of such amounts or tolerated by the borrowers.

The issue of trust in the banking system does not seem based in Iraq with the change witnessed by the conduct of the currency market in the Kurdistan region of Iraq, which has lost the semi-autonomous local businessmen, most of them residing in the city of Sulaymaniyah, about 500 million U.S. dollars.

The cause of this loss is attributed to the collapse of the Iranian currency after the imposition of U.S. sanctions and European, which led to the bankruptcy of a small active Iranian bank was working as an intermediary in the transfer of funds to and from Kurdistan Iraq, Dubai and Iran.

Incidents such as the public loses confidence in the banking sector, and most Iraqis remain skeptical of the performance of local banks due to the absence of laws under strict control, as well as poor banking culture which encourages the continuation of the current cash economy.

All these factors combined have contributed to the freeze on domestic and foreign investment that Iraq needs to rebuild the country, and encouraged local companies to apathy about the tax and social responsibility.

And other major issues facing the banking sector and public sectors in Iraq, the prevailing thought is that the policy comes from the top of the pyramid to reach the bottom.

Many Iraqi politicians, including the party of Prime Minister Nuri al-Maliki are suspicious of the private sector, and prefer to stick to what they know more, this will strengthen state control over almost all economic activities, including the banks.

On the positive side the Iraqi stock market has seen faster growth than any other index in the region, being the main trading bank stocks, and there are very optimistic growth expectations of the stock market, and this optimism reflects a significant vote of confidence in the future of the banking sector.

The reform of the banking sector will not be without the introduction of technology in banking, while only 20 percent of Iraqis have bank accounts and 80 percent of them have mobile phones, with the phone banking is a hot topic in the "integration of the banking sector and financial services in Iraq "held by the U.S. Agency for Development and the Central Bank of Iraq last November.

But, can not develop the banking sector in Iraq only through the introduction of new technology, it should start the update by opening markets to competition, if public banks remain dominant in the market, there is no there is a great opportunity to improve the current situation.

Privatization of major banks will be quick way to bring about a revolution in the Iraqi banking sector, with emphasis on the importance of that, but that this step may seem a long investigation due to the adherence to the current government to retain control over the banking sector.

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[thatoneguy]

Sounds like Southern California w/ the 'cash only' business.

Give the folks good reason to bank, and watch what happens.

Smart cards, ATM's, and a currency worth using ought to do the trick. I wouldn't be sold either with all the talk regarding this. Time to make a move!

[Mika]

This Iraqi banking sector looks like its headed for major growth.......... Thanks for the post......

[TrinityeXchange]

This Iraqi banking sector looks like its headed for major growth.......... Thanks for the post......

my sentiments exactly