Financial Crime World

Iraq’s Central Bank Issues New Regulation on Financing Medium, Small, and Micro Enterprises by Companies

In a move aimed at strengthening regulatory oversight in Iraq’s financial sector, the Central Bank of Iraq has officially issued and approved a new regulation governing the financing of medium, small, and micro enterprises by companies. The regulation, effective since April 28, 2024, replaces previous instructions on the matter.

Key Changes Under the New Regulation

Company Eligibility

  • Only joint-stock companies are permitted to engage in financing medium, small, and micro enterprises.
  • Limited companies are barred from this activity.

Capital Requirement

  • The required capital for joint-stock companies has been raised to IQD 100 billion, up from IQD 2 billion previously.
  • Companies can make an initial payment of IQD 40 billion and settle the remainder in three equal annual installments starting from the date of license issuance.

Approval Stages

  • The Central Bank of Iraq outlines the approval stages, emphasizing that initial approval does not guarantee final approval.
  • The central bank is granted authority to audit and supervise these companies’ activities.

Establishment Procedures for Regulated Companies

Administrative Departments

  • Companies are required to establish specific administrative departments overseeing their operations, including:
    • Financial management
    • Risk management
    • Compliance monitoring
    • Credit management
    • Anti-money laundering
    • Counter-terrorism financing
    • Internal audit
    • Financial awareness
    • Public protection
    • Complaint processing
    • Information technology
    • Legal management

Mandated Instructions

  • Companies must conclude loan contracts with clients.
  • They must submit periodic financial statements.
  • An online system for registering loan applications is required.
  • Funds must be allocated to mitigate risks.
  • An auditor must be appointed.

Loan Contract Requirements

Required Details

  • Client information
  • Loan duration and payment method
  • Interest amounts
  • Client-provided insurances
  • The loan’s purpose

Compliance Deadline

  • Licensed companies have a three-year grace period from the regulation’s issuance date to align their operations with the new requirements.
  • Those who fail to comply risk facing penalties and fines.

At Al Tamimi & Company, our Iraq office is dedicated to guiding clients through this significant legislative change. Our team of experts is committed to providing accurate and timely legal advice to help you navigate these changes effectively. With extensive knowledge of the Iraqi financial landscape, we can ensure that your company remains compliant with the new regulation and operates smoothly in the face of these changes.