Financial Crime World

IRAQ: Central Bank Approves New Regulations for Financing Medium, Small, and Micro Enterprises

Introduction

The Central Bank of Iraq has issued a new regulation governing the financing of medium, small, and micro enterprises by companies in the country. The Regulation on Financing Medium, Small, and Micro Enterprises by Companies, also known as the “New Regulation”, was issued on April 30, 2024, replacing the previous instructions on the matter.

Key Changes

The New Regulation outlines several key changes and requirements for companies seeking to engage in financing medium, small, and micro enterprises. These include:

  • Only joint-stock companies are permitted: The regulation effectively bans limited companies from engaging in this activity.
  • Increased required capital: Joint-stock companies must have a minimum capital of IQD 100,000,000,000 (one hundred billion Iraqi dinars), up from IQD 2,000,000,000 (two billion Iraqi dinars) previously.

Requirements for Companies

To engage in financing medium, small, and micro enterprises, companies must:

  • Establish specific administrative departments: Companies must set up separate departments to manage their financial activities.
  • Submit periodic financial statements: Companies must submit regular financial reports to the Central Bank of Iraq.
  • Allocate funds to mitigate risks: Companies must allocate funds to manage and mitigate potential risks.

Transition Period

Companies licensed before the issuance of these regulations have a three-year grace period from April 28, 2024 to align their operations with the new requirements. The decision has been in force since April 28, 2024.

Supervision and Auditing

The Central Bank of Iraq will have the authority to:

  • Audit company activities: The bank will conduct regular audits to ensure compliance with the new regulations.
  • Supervise company activities: The bank will monitor companies’ financial activities to identify potential risks and issues.

Requirements for Loan Contracts

Loan contracts must include:

  • Client details: A detailed description of the client, including their business and financial information.
  • Loan duration and payment method: Information on the loan’s repayment terms, including the duration and payment method.
  • Interest amounts: Details on the interest rates and fees associated with the loan.
  • Client-provided insurances: Information on any insurance policies provided by the client to secure the loan.
  • Loan purpose: A description of the purpose for which the loan is being used.

Conclusion

The New Regulation aims to promote the growth and development of medium, small, and micro enterprises in Iraq. With the help of international law firm Al Tamimi & Company, businesses can navigate these changes effectively and ensure compliance with the new regulations.