Financial Crime World

Banking Sector in Iraq: Challenges and Opportunities

==============================================

Key Players in the Iraqi Banking Sector

The Central Bank of Iraq (CBI) plays a crucial role in regulating the banking sector. Several banks operate in Iraq, including:

  • State-owned banks
  • Private local banks
  • Foreign banks
  • Electronic payment service providers like:
    • Mastercard International
    • Visa International
    • MoneyGram
    • NEO
    • FastPay

Investment in the Iraqi Banking Sector

In 2021, CBI allocated around 42 trillion IQD towards sectoral development. Notably:

  • State-owned banks led the investment scene in 2021 with a growth of 11.4% compared to the previous year.
  • Private shared and local banks’ investments skyrocketed in 2021.
  • Private foreign banks’ investments declined.

Major Issues Facing the Iraqi Banking Sector

Several challenges hinder the development of the banking sector:

  • Insufficient electronic payment infrastructure: This hinders the adoption of digital payments.
  • Dominance of cash: Cash remains dominant in Iraq’s economy due to a lack of trust in banking institutions.
  • Challenges faced by Islamic banks: Religious concerns and Islamic banks face challenges in operating effectively due to limited expertise, inadequate legal protection, and competition from commercial banks.

Recommendations for Improving the Banking Sector

To overcome these challenges:

  • Increase bank branch reach across Iraq to enhance accessibility and promote financial inclusion.
  • Automate all operations using modern electronic systems.
  • Cultivate a culture of customer reliance and diversify services to gain public trust.
  • Implement QR code payment and other digital payment methods to increase adoption.
  • Legislate specialized laws for Islamic banks and finance to unify their functions in accordance with Islamic Sharia law.

Overall, the banking sector in Iraq requires improvements in accessibility, financial inclusion, and cash dominance. Addressing these challenges can pave the way for a more robust and inclusive financial system.