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The banking sector in Iraq and the challenges of reform and development
5/20/2015
banking sector plays a prominent role in the mobilization of economic resources and the financing of economic growth as well as its role in the achievement of financial and monetary stability of the economies
Modern. And despite the fact that the Iraqi banking sector is one of the ancient systems in the Arab region, but it remains a traditional system in his work slow in its development, as it gave the war experienced by Iraq since 1980 and the economic blockade conditions in 1991 and economic philosophy that prevailed in the Iraqi economy overshadowed the banking sector in the country, leaving the inherited human and frameworks and contexts of work and laws have created a large gap between him and prevailing in the region and the world banking systems.
It consists of the Iraqi banking system of the Central Bank of Iraq, in addition to 54 banks, including six state banks are) Rivers, Rasheed, Iraqi Trade Bank, the Agricultural Cooperative, industrial, real estate) as well as 30 private banks in addition to the 15 branches For foreign banks, and there are seven posts Arab and foreign in Iraqi banks 'capital, which allowed the Banking Act No. 94 of 2004 and regulations issued thereunder participation of foreign banks in the Iraqi banks' capital, has this review ranged between 45% and even more than 85% in some 1 banks.
Features banking failure in Iraq
The banking sector in Iraq suffers from a large number of aspects of backwardness and shortcomings that limit the possibility of advancement of this sector and coping with the banking systems and the Arab world, and took a role in supporting the growth and financial stability and economic process. In this context it can be highlighted a number of observations and the problems suffered by the Iraqi banking system, as follows:
1. Low banking density which currently stands at the limits of one bank branch for every 35,000 inhabitants, which is low compared to the global standard amounting to one bank for every 10,000 inhabitants 2 .
2. The absence of banking strategies actors annual detailed plans for the majority of banks and provided for by the Banking Act, the twenty-sixth its article.
3. absence chock of the banking system institutions, such as deposit insurance, and other insurance on large loans Company, Inc. to study the market risk, and others.
4 - Do not fit banking services with requirements and economic needs of Iraq in light of the orientations of the growth of the market economy, where the number of services up to (20) compared to what made possible by Article Service (27) of the Banking Act, which amounted to more than (50) banking service, which is less than offer Arab and foreign banks.
5. slouch administrative structure in a lot of banks, especially in government banks.
6. policy of government discrimination in dealing with private banks, which is to prevent the state departments and public sector companies to deposit their money in those banks, and not to accept certified and regular instruments and letters of guarantee issued by it, but within certain limits do not allow competition with state banks.
7. traditional routine procedures adopted by the Registrar of Companies Department, which cause delay ratification of the decisions taken by public bodies for banks, including the increase of capital, holding its general assembly meetings.
8. delayed re private banks shares are traded on the current trading sessions in the Iraq Stock Exchange, causing damage and losses to shareholders and investors alike.
9. delayed government banks and some private banks in the acquisition of a comprehensive or linking branches communications network with their public administrations, and its failure to take appropriate action banking systems the application of e-banking, including electronic instruments.
10. low credit ratio to GDP, with this percentage ranging between 9 to 10% of GDP, compared with 55% in the total Middle East and North Africa. If Nspena volume of credit to the heads of banks, funds and reserves sound it does not exceed 2.1 times, while the central bank instructions that allow credit of eight times the bank's capital and reserves 3 sound.
11. provide high liquidity in banks is approaching 60%, which reflects sector deficit for the operation and investment of assets and deposits, including the national economy to serve on the one hand and adversely affect the profitability of banks, on the other hand wasting the available investment opportunities.
12. There is a great disparity between the price of interest payable and receivable in the Iraqi market, price of interest on fixed deposits and savings of between 1 7%, while the interest rate on credit from 10 to 15% range, leaving a margin of about 8% between the two prices, a large margin when compared to the 5% prevailing in the countries of the Middle East and North Africa. There is no doubt that the rise in interest rates this negative impact on the credit size, but an obstacle to borrow for development purposes.
13. slowdown in legislation working to move the banking reform wheel, and a number of banking reform projects still on the government and the House of Representatives shelves awaiting discussion and acknowledgment.
14. blurred visions and economic policies and lack of coordination between fiscal and monetary policies to adopt in support of the banking reform plans, as well as the weakness of inter-relationship between the various relevant authorities (the central bank, the Ministry of Finance, State-owned banks, including eligibility), eg the issuance of instructions from the Ministry of Finance concerning the non-acceptance of the instruments and letters of guarantee from banks.
15. administrative and financial behaviors bureaucracy in the administrative hierarchy of government banking institutions, including the civil corruption.
16. existing legislation and regulations that are reluctant to work of banks and limit the expansion and development of the banking sector in the country, including bureaucratic red tape associated with for the granting of investment loans for business.
17. lack of vision of the future for the local reality to the process of banking reform by those who made it in the Ministry of Finance and the Central Bank, as the privacy status of the banking sector and the suffering of the problems requires a special perception in tune with the current reality and with the advanced experiences abroad .
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1 - Majid picture, the reform of the banking system in Iraq, the magazine Dialogue, the Institute of the progress of development policies, 2014.
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2 - The Central Bank of Iraq, the annual economic report, the Directorate General of Statistics and Research 0.2013, p. 4.
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3 - conciliator Hassan Mahmoud, the reality of the Iraqi banking sector and its role in supporting economic development, the newspaper world, No. 1258, May 2015.
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5/20/2015
banking sector plays a prominent role in the mobilization of economic resources and the financing of economic growth as well as its role in the achievement of financial and monetary stability of the economies
Modern. And despite the fact that the Iraqi banking sector is one of the ancient systems in the Arab region, but it remains a traditional system in his work slow in its development, as it gave the war experienced by Iraq since 1980 and the economic blockade conditions in 1991 and economic philosophy that prevailed in the Iraqi economy overshadowed the banking sector in the country, leaving the inherited human and frameworks and contexts of work and laws have created a large gap between him and prevailing in the region and the world banking systems.
It consists of the Iraqi banking system of the Central Bank of Iraq, in addition to 54 banks, including six state banks are) Rivers, Rasheed, Iraqi Trade Bank, the Agricultural Cooperative, industrial, real estate) as well as 30 private banks in addition to the 15 branches For foreign banks, and there are seven posts Arab and foreign in Iraqi banks 'capital, which allowed the Banking Act No. 94 of 2004 and regulations issued thereunder participation of foreign banks in the Iraqi banks' capital, has this review ranged between 45% and even more than 85% in some 1 banks.
Features banking failure in Iraq
The banking sector in Iraq suffers from a large number of aspects of backwardness and shortcomings that limit the possibility of advancement of this sector and coping with the banking systems and the Arab world, and took a role in supporting the growth and financial stability and economic process. In this context it can be highlighted a number of observations and the problems suffered by the Iraqi banking system, as follows:
1. Low banking density which currently stands at the limits of one bank branch for every 35,000 inhabitants, which is low compared to the global standard amounting to one bank for every 10,000 inhabitants 2 .
2. The absence of banking strategies actors annual detailed plans for the majority of banks and provided for by the Banking Act, the twenty-sixth its article.
3. absence chock of the banking system institutions, such as deposit insurance, and other insurance on large loans Company, Inc. to study the market risk, and others.
4 - Do not fit banking services with requirements and economic needs of Iraq in light of the orientations of the growth of the market economy, where the number of services up to (20) compared to what made possible by Article Service (27) of the Banking Act, which amounted to more than (50) banking service, which is less than offer Arab and foreign banks.
5. slouch administrative structure in a lot of banks, especially in government banks.
6. policy of government discrimination in dealing with private banks, which is to prevent the state departments and public sector companies to deposit their money in those banks, and not to accept certified and regular instruments and letters of guarantee issued by it, but within certain limits do not allow competition with state banks.
7. traditional routine procedures adopted by the Registrar of Companies Department, which cause delay ratification of the decisions taken by public bodies for banks, including the increase of capital, holding its general assembly meetings.
8. delayed re private banks shares are traded on the current trading sessions in the Iraq Stock Exchange, causing damage and losses to shareholders and investors alike.
9. delayed government banks and some private banks in the acquisition of a comprehensive or linking branches communications network with their public administrations, and its failure to take appropriate action banking systems the application of e-banking, including electronic instruments.
10. low credit ratio to GDP, with this percentage ranging between 9 to 10% of GDP, compared with 55% in the total Middle East and North Africa. If Nspena volume of credit to the heads of banks, funds and reserves sound it does not exceed 2.1 times, while the central bank instructions that allow credit of eight times the bank's capital and reserves 3 sound.
11. provide high liquidity in banks is approaching 60%, which reflects sector deficit for the operation and investment of assets and deposits, including the national economy to serve on the one hand and adversely affect the profitability of banks, on the other hand wasting the available investment opportunities.
12. There is a great disparity between the price of interest payable and receivable in the Iraqi market, price of interest on fixed deposits and savings of between 1 7%, while the interest rate on credit from 10 to 15% range, leaving a margin of about 8% between the two prices, a large margin when compared to the 5% prevailing in the countries of the Middle East and North Africa. There is no doubt that the rise in interest rates this negative impact on the credit size, but an obstacle to borrow for development purposes.
13. slowdown in legislation working to move the banking reform wheel, and a number of banking reform projects still on the government and the House of Representatives shelves awaiting discussion and acknowledgment.
14. blurred visions and economic policies and lack of coordination between fiscal and monetary policies to adopt in support of the banking reform plans, as well as the weakness of inter-relationship between the various relevant authorities (the central bank, the Ministry of Finance, State-owned banks, including eligibility), eg the issuance of instructions from the Ministry of Finance concerning the non-acceptance of the instruments and letters of guarantee from banks.
15. administrative and financial behaviors bureaucracy in the administrative hierarchy of government banking institutions, including the civil corruption.
16. existing legislation and regulations that are reluctant to work of banks and limit the expansion and development of the banking sector in the country, including bureaucratic red tape associated with for the granting of investment loans for business.
17. lack of vision of the future for the local reality to the process of banking reform by those who made it in the Ministry of Finance and the Central Bank, as the privacy status of the banking sector and the suffering of the problems requires a special perception in tune with the current reality and with the advanced experiences abroad .
------------------------------------------------- -----------
1 - Majid picture, the reform of the banking system in Iraq, the magazine Dialogue, the Institute of the progress of development policies, 2014.
---------------
2 - The Central Bank of Iraq, the annual economic report, the Directorate General of Statistics and Research 0.2013, p. 4.
---------------
3 - conciliator Hassan Mahmoud, the reality of the Iraqi banking sector and its role in supporting economic development, the newspaper world, No. 1258, May 2015.
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