Financial Institutions’ Due Diligence in Iraq: A Model for Inclusive Economic Growth

In a region ravaged by conflict, financial institutions are playing a vital role in promoting inclusive economic growth. The Overseas Private Investment Corporation (OPIC), the US government’s development finance institution, has partnered with Vitas Iraq, a subsidiary of Global Communities, to build a more inclusive financial sector in the country.

A Model for Inclusive Economic Growth

The partnership between OPIC and Vitas Iraq has led to significant progress. Vitas Iraq established Al Tamweel Al Saree LLC (ATAS) as its financing vehicle, which enabled the expansion of Vitas Iraq’s portfolio of loans to individuals and micro, small and medium-sized enterprises (MSMEs).

Supporting Inclusive Economic Growth

The loan provided by OPIC has supported inclusive economic growth in Iraq, particularly in central and southern regions that have been less directly impacted by conflict. Vitas Iraq lends to Iraqi individuals and small businesses who do not otherwise have access to sufficient capital, making it the largest microfinance institution (MFI) in the country with a market share of nearly 40 percent.

Financial Performance

The institution’s performance has been impressive:

Gross loan portfolio: $69.8 million as of December 2016
Average annual growth rate: 12% since 2013
Portfolio at Risk (PAR30): below 2%

But the partnership is not just about financial returns; it’s also about social impact. Vitas Iraq and OPIC have endorsed the Smart Campaign, a global effort to integrate client protection into MFIs’ due diligence, investee selection and loan covenants. This commitment to balancing financial and social impact has resulted in significant benefits for clients.

Real-Life Stories

Adaweya, a woman who received financing from Vitas Iraq, was able to:

Expand her sewing business
Increase her income
Provide education to her daughters and treatment to her husband after he became disabled

Houssam, another client, was able to:

Open up a spare parts shop with the help of a Vitas Iraq loan
Enable him to provide for his family

Conclusion

These stories highlight the transformative power of access to finance in post-conflict countries like Iraq. The work of Vitas Iraq has helped build an inclusive financial sector in the country, providing education and training to entrepreneurs to better manage their loans and business paths.

As the region continues to rebuild and revitalize its economy, the importance of financial institutions’ due diligence cannot be overstated. The partnership between OPIC and Vitas Iraq serves as a model for inclusive economic growth, demonstrating that responsible lending can have a significant impact on individuals and communities.