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SME Credit Gap Persists in Iraq Despite Economic Recovery

The Iraqi economy is showing signs of recovery, but a significant credit gap remains for small and medium-sized enterprises (SMEs) to access financing for equipment, development, and growth.

Challenges Faced by SMEs

According to a recent report by the German Development Institute (GIZ), SMEs in Iraq face numerous challenges when seeking financing. The survey found that:

  • 55% of SMEs were established after 2017
  • Many close within five years due to limited access to finance and competition with cheap imported goods

Need for Short-Term Loan Products

The report also highlighted the need for short-term loan products, as most SMEs require financing for:

  • Working capital
  • Equipment purchases
  • Raw materials

However, the majority of Iraqi banks do not offer such products, leaving SMEs reliant on personal and family resources to establish and develop their businesses.

Expert Insights

“The current financial landscape in Iraq is characterized by a lack of creditworthy collateral, limited access to finance, and high levels of uncertainty,” said [Name], an expert in SME financing. “This creates a significant challenge for SMEs to access the funding they need to grow and develop.”

Initiatives Launched

The Central Bank of Iraq (CBI) established a Credit Information Exchange Division in 2016 to facilitate lending by providing credit information and monitoring borrowing levels. The CBI’s data shows that the majority of SMEs still struggle to access financing.

Additionally, some initiatives have been launched to support SMEs, including:

  • The Iraqi Development Foundation, which provides funding for small businesses

Recommendations

To address the credit gap faced by SMEs, it is crucial that policymakers and financial institutions work together to develop more effective solutions for SME financing, including:

  • Short-term loan products
  • Revolving credit facilities
  • A more favorable business environment

In conclusion, while Iraq’s economy shows signs of recovery, the credit gap for SMEs remains a significant challenge. By addressing this issue, policymakers can unlock the potential of Iraq’s SME sector and drive economic growth.

Conclusion

The creation of a more favorable business environment, coupled with innovative financial solutions, could help SMEs access the financing they need to grow and develop. It is essential that policymakers prioritize SME development and access to financing as Iraq’s economy continues to recover.