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Electronic Banking and Payment in Iraq: A Growing Sector with Challenges Ahead

Baghdad, Iraq - The Central Bank of Iraq (CBI) has made significant strides in revitalizing the country’s banking sector since 2003, introducing electronic payment systems and regulations to keep pace with global trends. Despite progress, the sector still faces several challenges, including an insufficient electronic payment infrastructure, dependence on cash, lack of public trust, and religious concerns.

Electronic Payment Systems

The CBI has implemented various electronic payment systems, including:

  • Cash Automated Clearing House
  • Real-Time Gross Settlement System (2006)
  • Retail payment regulations (2014)
  • Iraq Retail Payment System Infrastructure (2016)
  • Authorization of mobile wallets like ZainCash and Islamic banks

Increasing Issuance of Electronic Payments

The salary domiciliation initiative has led to an increase in the issuance of electronic payments, with over 42 trillion Iraqi dinars allocated for development projects in 2021. However, this growth is hindered by a lack of acceptability due to insufficient POS and ATM systems.

Dependence on Cash

Cash remains dominant in Iraq’s economy, hindering the growth of the banking sector. The reliance on oil revenue and the need to withdraw cash during crises exacerbate this issue.

Lack of Public Trust

Iraqis do not trust their banking institutions due to:

  • Limited services
  • High-interest rates
  • Demanding guarantee requirements
  • Low market penetration
  • Religious concerns and preference for keeping money in cash at home

Religious Concerns and Islamic Banks

Islamic banks have developed in response to religious reservations about conventional commercial banks. However, they face challenges such as:

  • Insufficient expertise
  • Absence of an Islamic financial market
  • Inadequate legal protection

Recommendations

To address these challenges, experts recommend:

  • Increasing the reach and number of bank branches across Iraq
  • Acquiring modern electronic systems
  • Gaining public trust through customer-centric services
  • Accelerating the implementation of POS and ATM systems
  • Legislation of specialized laws for Islamic banks and finance to unify their functions in accordance with Islamic Sharia law

QR Code Payment

The introduction of QR code payment by ZainCash could lead to rapid adoption, given the widespread use of smart phones in Iraq.

Full Report Available

For a comprehensive analysis of electronic banking and payment in Iraq, including recommendations for growth and development, read the full report or magazine.