Financial Crime World

Iraqi Financial Regulation Updates: Central Bank Issues New Guidelines for Small and Medium Enterprises

Baghdad, April 30, 2024 - A New Era for SME Financing in Iraq

The Central Bank of Iraq has officially approved and issued a new regulation governing the financing of medium, small, and micro enterprises by companies. The regulation, effective as of April 28, 2024, replaces previous instructions and outlines key changes for joint-stock companies engaged in this activity.

Key Changes in the New Regulation

  • Only joint-stock companies are permitted to engage in financing medium, small, and micro enterprises, effectively excluding limited companies from this sector.
  • The required capital for joint-stock companies has been increased to IQD 100 billion (one hundred billion Iraqi dinars), up from IQD 2 billion (two billion Iraqi dinars) previously.

Approval Stages and Supervision

  • The new regulation outlines specific approval stages issued by the Central Bank of Iraq, stressing that initial approval does not guarantee final approval.
  • The Central Bank has been granted the authority to audit and supervise these companies’ activities.

Requirements for Regulated Companies

  • 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

Loan Contract Requirements

  • Concluding loan contracts with clients must include:
    • Client details
    • Loan duration and payment method
    • Interest amounts
    • Client-provided insurances
    • The loan’s purpose
  • Submitting periodic financial statements
  • Establishing an online system for registering loan applications
  • Allocating funds to mitigate risks
  • Appointing an auditor

Transition Period for Licensed Companies

Companies licensed before the issuance of these regulations have a three-year grace period from the regulations’ issuance date to align their operations with the new requirements.

Strengthening Iraq’s Financial Sector

The Central Bank of Iraq has emphasized that the new regulation aims to strengthen the country’s financial sector by introducing stricter guidelines for small and medium enterprises. The move is expected to promote transparency, accountability, and stability in the sector.

At Al Tamimi & Company, our Iraq office is committed to guiding clients through this transition and ensuring compliance with the new regulations. Our legal experts are available to provide accurate and timely advice to help navigate these changes effectively.