Chapter 8: Financial intermediation
Along with corruption and a hostile regulatory environment (Chapters 4 and 10), Iraq’s dysfunctional banking system completes a trifecta of bad policy that both impedes improvement in the average Iraqi’s quality of life and severely complicates the GoIs attempts to diversify the economy. Checking accounts, credit cards, and simple electronic transfers are generally unavailable; as a result, most transactions are in cash, and with this brings all of the associated security problems and inefficiencies. There are few ATMs and mortgage loans are rare. For a private business to borrow is a complex and drawn out process. Even if a loan is eventually approved, private businesses can only borrow small amounts at a high interest rate and only after pledging substantial collateral. Even the use of banks as a safe place to keep funds is limited. With only about 900 bank branches in a country of 31 million people, Iraq is the most “under-banked” country among the MENA countries (Kami and Bayoumy 2012). Only about 10 percent of all Small and Medium Enterprises (SME) in Iraq have a bank account.
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