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Financial Services Regulatory Updates in Iraq: What You Need to Know

In a move aimed at strengthening the regulatory framework for small and medium-sized enterprises (SMEs) in Iraq, the Central Bank of Iraq has officially approved a new regulation on financing medium, small, and micro enterprises by companies. The Regulation on Financing Medium, Small, and Micro Enterprises by Companies, also known as the New Regulation, comes into effect from April 28, 2024.

Key Changes Under the New Regulation

The New Regulation marks a significant departure from the previous instructions governing SME financing in Iraq. Some of the key highlights include:

  • Joint-Stock Companies Only: Only joint-stock companies are now permitted to engage in SME financing, with limited companies explicitly barred from this activity.
  • Minimum Capital Requirement Increased: The minimum capital requirement for joint-stock companies has been raised to IQD 100 billion, up from IQD 2 billion and IQD 1 billion previously required for limited companies.
  • Installment Payments Allowed: Companies can pay an initial installment of IQD 40 billion and settle the remainder in three equal annual installments starting from the date of license issuance.

Additional Requirements Under the New Regulation

The New Regulation also outlines a range of additional requirements for companies licensed to engage in SME financing. These include:

  • Administrative Departments Established: Establishing specific administrative departments overseeing operations, including financial management, risk management, compliance monitoring, and more.
  • Loan Contracts and Financial Statements: Concluding loan contracts with clients, submitting periodic financial statements, and establishing an online system for registering loan applications.
  • Risk Mitigation and Compliance: Allocating funds to mitigate risks, appointing an auditor, and ensuring compliance with anti-money laundering and counter-terrorism financing regulations.

Companies Licensed Before the New Regulation

Companies licensed before the issuance of the New Regulation have a three-year grace period to align their operations with the new requirements. The New Regulation comes into force on April 28, 2024, and licensed companies must comply with its provisions within this timeframe.

At Al Tamimi & Company, our Iraq office is dedicated to helping clients navigate these significant legislative changes. Our team of experts provides accurate and timely legal advice to ensure compliance with the New Regulation. We can help you understand the implications of the new regulation for your business and provide guidance on how to adapt to the changes.

Contact Us Today

To learn more about how we can support you in this transition, please contact us today. Our team is committed to helping you navigate the changing regulatory landscape in Iraq.