The home is safer, ".. Iraqis are losing confidence in local banks

by **claud39** Wed Dec 02, 2020 6:48 pm

{Baghdad: Al Furat News} Businessmen in Iraq suffer from weak banking systems, which drives them to resort to banks in neighboring countries in their international commercial dealings, while many citizens do not trust them and save their money in their homes.

"The Iraqi banking systems are now far from international standards," said economic expert and head of the Lawyers Union in Diwaniyah, Abbas Enaid Ghanem.

According to Ghanem, the problems go back decades, and specifically to the 1990s, when the sanctions imposed on Saddam Hussein's regime caused the isolation of Iraq from the world. After the US-led coalition entered the country in 2003, widespread looting emptied banks of liquidity.

More than 70 banks have been established since then, but the sector as a whole has not developed. The World Bank reported in 2018 that the three largest banks, namely Al-Rafidain, Al-Rasheed and Al-Iraqiya for state-owned trade, hold about 90 percent of the sector's assets.

No facilities.

The three public banks mainly pay the salaries of eight million Iraqi employees. But the state had to borrow from it due to the collapse in oil prices this year, which raised its domestic debt.

As for the director of the Al-Akhyyar Contracting Group, Adel Al-Salhi, the problem with public banks is that they are satisfied with "loans (to the state) and pay employees' salaries and are not interested in dealing with the trade sector and supporting businessmen."

This applies especially to the Rafidain and Rashid banks, and to a lesser extent to the Iraqi Trade Bank, which was established by the US Coalition Provisional Authority under the supervision of the civilian governor Paul Bremer in 2003. But Ghanem explains that “sectarian and partisan quotas in the political system and administrative and financial corruption are matters that have affected this banking institution.” Its role was almost limited to lending to the government.

Although the Iraqi Trade Bank is the only one that enables merchants to open credits, it “does not provide any banking facilities to us (businessmen), and asks us for guarantees with a very high value of up to 110 percent to provide a letter of guarantee only,” according to Al-Salhi.

This prompted the group of good guys for contracting to resort to banking services outside the country, like many companies that have come to rely on banks in Jordan, Turkey, Lebanon or even Iran to facilitate their dealings.

The issue is not only related to financial facilities, but also, according to Al-Salhi, to "transparency" in transactions and the provision of "special employees from within the banks (...) according to the evaluation and work of the merchant," unlike Iraqi banks that "deal with us as employees in a dry manner."

According to the World Bank, less than 5 percent of small and medium-sized enterprises obtained loans from local Iraqi banks, while most merchants and investors resorted to borrowing from family and friends.

Ghanem attributed this to the high value of interest that banks take, especially in investment projects, as it "ranges between seven to ten percent, while most of the world's advanced banks do not reach more than one percent."

Iraq ranked 172nd out of 190 countries classified in the "Ease of Doing Business Index" report issued by the World Bank, just ahead of Afghanistan and war-torn Syria, despite it being the second crude producer in OPEC.

Money is at home

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The problems of the Iraqi banking sector do not stop at companies, as its services are not popular with citizens either.

World Bank figures indicate that only 23 percent of Iraqi families have an account with a financial institution, which is among the lowest in the Arab world. Those account holders are especially state employees whose salaries are distributed to public banks at the end of each month.

But salaries do not remain long in the accounts, as soon queues form in front of banks of employees who withdraw their salaries in cash and prefer to keep them in their homes, because of the weak confidence of Iraqis in banks.

Memories of bank looting and robbing during the 2003 invasion are still fresh in their minds, and many lost their savings.

Nabil Kazem was one of the victims. After robbing the banks, he says, "I found it very difficult to get my money back. It was only after years that I lost confidence in the banks." In addition, Kadhim attributes his reluctance to keep his money in the bank to the lack of electronic and card-based payment mechanisms in "buying and selling transactions, especially in large amounts transactions."

Kazem prefers to resort to the services of exchange offices or private banks to obtain remittances from abroad because they are "better and faster than government banks, but even more secure than them." The economic expert, Abbas Inid Ghanem, explains that "Iraqi banks do not allow deposits in dollars for savings purposes, and this causes a great loss of hard currency."

This also reveals the lack of confidence in the local currency, as many citizens "convert their savings and money into dollars and hoard them in homes."

Ghanem notes that there is a paradox between official discourse and reality. "The state calls on citizens to deposit their savings in banks," while "it does not amend the laws of these banks and does not provide them with any basic services."

Forgiveness Al-Khalidi

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