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Cash Assistance in Iraq: A Review of Humanitarian Cash Transfer Mechanisms

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Iraq has been grappling with humanitarian crises for decades, resulting in significant displacement and economic instability. In response to these crises, international organizations and local implementing agencies have turned to cash assistance as a means of providing support to affected populations. This article reviews the current state of humanitarian cash transfer mechanisms in Iraq, highlighting the challenges and opportunities faced by donors and recipients alike.

Thresholds for Cash Transfers

To minimize the risk of cash supporting entities that are sanctioned, international agencies have established thresholds for cash transfers. These thresholds will need to be determined considering the average cash assistance amounts offered by implementing agencies. The Central Bank of Iraq (CBI) has also set withdrawal limits in Iraq, and payment transaction approval processes are in place to ensure timely and secure transactions.

Availability of Financial Services

The study found that 40% of interviewed financial service providers (FSPs) reported having a presence across all governorates in Iraq. The availability of transfer mechanisms includes:

  • Electronic systems
  • Physical cash
  • Cash-in-envelopes
  • Cheques
  • Bank accounts
  • Mobile money transfers

Zain mobile money transfer has the largest number of agents and covers all governorates in Iraq.

Mobile Coverage and Network Stability

While mobile coverage is adequate across most areas, there are some rural locations and border areas near Mosul where network stability is a concern. Mobile money transfers are managed through a network of agents and ATMs across Iraq.

Payment Approval Process and Cash Flow Analysis

The payment approval process varies depending on the type of transfer modality used. Locally initiated transactions typically take three days to process, while international transfers can take up to five days due to intermediary bank processing times. The CBI has introduced restrictions on international transactions to address USD cash liquidity crises.

Transaction Limits and Associated Fees

  • Banks charge a transfer fee rate of 0.7%
  • Hawala dealers charge between $2-$4 per transaction
  • Mobile money services charge fees ranging from 1.5% to 2%
  • The CBI has introduced restrictions on international transactions, allowing only 75% of international transactions to be paid in USD

Available Delivery Mechanisms and Required Documentations

The study found that different cash transfer mechanisms require different documentations and regulations. For example:

  • Mobile money services require:
    • Beneficiary registration (wallet on their sim)
    • Training of beneficiaries
    • Cash-out monthly reports
    • Report through online portal
  • Cash transfer charges vary depending on the governorate, with Asia cell reporting cash-out fees ranging from 0.5% to 1.2%

Conclusion

Cash assistance remains a crucial component of humanitarian responses in Iraq. While there are challenges associated with cash transfers, including the need for robust payment approval processes and transaction limits, the benefits of this approach cannot be overstated. As international organizations and local implementing agencies continue to explore new ways to support affected populations, it is essential that they prioritize transparency, accountability, and the needs of recipients in their decision-making processes.

Recommendations

  1. The CBI should consider introducing standard fees for Hawala dealers and mobile money services to ensure fairness and transparency.
  2. Implementing agencies should prioritize training for beneficiaries on cash transfer mechanisms and provide ongoing support as needed.
  3. Mobile money service providers should continue to expand their networks and improve coverage in rural areas.
  4. International organizations should work closely with local implementing agencies to ensure that cash assistance programs are responsive to the needs of affected populations.

Sources

  • Central Bank of Iraq
  • Financial Service Providers Assessment Iraq 2020
  • International Organization for Migration (IOM)
  • United Nations Office for the Coordination of Humanitarian Affairs (OCHA)