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Chairman of the Board of Directors of the International Development Bank, Ziyad Khalaf Abd
Economy News _ Baghdad
The representative of Iraq in the Union of Arab Banks, Chairman of the Board of Directors of the International Development Bank, Ziyad Khalaf Abd, confirmed that facing the financial crisis requires a road map to activate the private sector, while stressing that reducing the rate of lending interest is subject to conditions.
Abd said in an interview with the Iraqi News Agency (INA) and seen by "Al-Iktissad News", that "the government must, in the coming period, work on a clear road map and a clear vision, with the aim of activating the role of the private sector and all its branches, and in various economic sectors, and in a way that guarantees an increase." Productivity, and reducing the financial burden on the government by providing job opportunities for the workforce, "noting that" it is necessary to work in the coming period to liberalize the banking sector, and to work to provide all possible support and means for the purpose of advancing the sector, which is the backbone and main engine. " For the rest of the economic sectors. "
Abd added, "There are a large number of solutions that the government could address in the coming period, including activating public and private sector partnerships in the electricity, energy, industry and agriculture sectors, in a way that ensures the increase in the efficiency of these institutions, and also reduces the financial burden on the state treasury, as well." Providing an appropriate environment for foreign investment, "noting that" the issue of privatization of loss-making companies must be considered, which increases the financial burden on the state so that these companies are fully or partially privatized and each case separately, and it is important in the coming period that the government reconsider a large number. " Of the legislation, and instructions for internal and external investment, in a way that contributes to developing the investment environment, and reducing costs, risks and challenges for companies that intend to invest in Iraq.
He explained that "private and governmental banks, in cooperation with the Central Bank, must work to provide the necessary lending and financing for companies in the industrial and agricultural sectors, and in a way that contributes to the transformation of Iraq from a rentier economy dependent on oil exports to an exporting country that has self-sufficiency."
The banking revolution
The head of the Development Bank pointed out that "the Iraqi national banking sector has witnessed a revolution and a qualitative shift in the past few years, through banking and electronic products and services provided by these banks, which came after private banks realized the importance of investment in the infrastructure side, and the necessary electronic systems today." To apply banking technology and digital transformation, in a way that contributes to providing the best advanced banking services, "indicating that"The Development Bank has worked diligently in implementing leading banking practices by providing a variety of loans and advances, in line with the requirements of societal segments, as well as the requirements of small and large companies, and providing the required financing needs, as the bank granted more than (35) billion dinars in part Emiratization loans, as well as more than (15) billion dinars in financing small and medium-sized companies. In addition, the bank has developed multiple products on the deposit side, in a way that contributes to attracting depositors and providing safe haven for investment by providing a large number of deposits and with multiple benefits , In order to provide the desired return rates for each depositor, and to continue to distribute the profits of this investment on a monthly basis to help the customer cover his expenses and daily needs.
With regard to interest rates on loans, Abed said, “Banks depend on specific contexts and mechanisms when calculating interest margin rates and interest rates on lending, as the cost of funds is taken into account, in other words the interest paid on the deposit side. In Iraq, this percentage is considered very high compared to neighboring countries and the world, which amounts to more than (7%) annually on the dinar, in addition to this, the cost of managing, transporting and preserving funds in Iraq is high and in light of the high operating expenses, as well as the cost of insurance. "On these funds, and accordingly, and to maintain the internationally accepted interest margin ratio (2% -3%), Iraqi banks are forced to lend at least (10%) annually."
He continued, "Accordingly and given the need to reduce the interest rates received by banks on the lending side, it is necessary to work to liberalize the banking sector, and to reduce the dominance of government banks in dealings with the public sector, in a way that enhances the sources of funds available to the private banking sector, and to reduce Significantly on the cost of sources of funds, which will directly contribute to reducing the interest on the lending side, noting that “the interest rate paid on lending takes into account the risks related to the customer, and also Iraq, as the current economic and security situation imposes high risks on banks, Thus, the return and risk must be in line with international banking practices.
Abd pointed out that "the interest paid on fixed deposits in Iraq is the highest regionally and globally, as if the interest paid on deposits in neighboring countries is compared, which does not exceed 3% annually and in European countries, the LIBOR does not exceed half a percent annually." ", Stressing that" these benefits are high due to the great risks related to Iraq, as well as the exchange rate, which is subject to great fluctuations due to the previous economic and security situation, in addition to the fact that the public sector and the public have very little confidence in the private sector, which forces banks to provide attractive returns to bring These deposits. "
He indicated that "the deposit guarantee company project is one of the most important projects undertaken by the central bank in recent times and the most important and primary for the private banking sector, as this company would work to increase public confidence in the private banking sector, as well as increase awareness and experience of the need to deal with banks." And, similar to what is applied in neighboring countries, explaining that “this company aims to provide the required coverage to the public in the event that a bank fails to pay its obligations to depositors. In banks, including the risk management department, and the liquidity department, they will have a major role in managing the deposit portfolio for the bank, and work on managing and harmonizing the maturities of assets and liabilities in a manner that ensures the provision of the required liquidity at all times.
Abd pointed out that "the issue of bank merging is a collection matter and it is not necessary to be imposed on banks, and there are more than (40) domestic, commercial and Islamic banks in Iraq today, but the intense competition between these banks will force small banks to exit the market. Or to accept the acquisition from one of the large banks, as this phenomenon occurred in most of the neighboring countries, and the future of the Iraqi private banking sector will not be different from these experiences, "indicating that"These banks are restricted during the next (5) years to (25) banks, and the issue of increasing the capital of banks today is absolutely unnecessary, as the capital of Iraqi banks is the highest in the Arab world in terms of the requirements of central banks in neighboring countries, in addition to That the capital adequacy ratio, and other regulatory ratios related to capital, have been achieved, largely by Iraqi banks, and therefore there is no requirement to increase the capital, which is considered idle capital.
Abd affirmed that "the Central Bank of Iraq has led in the last three years a comprehensive process, with regard to the environment and the legislative and regulatory framework for banks, especially the issues of compliance, combating money laundering, good corporate governance, risk management, systems and infrastructure for information technology systems used in banks, which is what He contributed to a quantum leap for Iraqi banks. He contributed to helping our Iraqi banks implement pioneering banking practices, similar to banks in neighboring countries, stressing that "Among the most important achievements made by the Central Bank recently is the issuance of the Anti-Money Laundering and Terrorist Financing Law No. 39 in the year 2015, which gave full independence to the reporting office on combating money laundering and financing of terrorism headed by the Governor of the Central Bank of Iraq, in addition to the approval of comprehensive instructions for institutional governance in banks that It separated the role of the legislative authority in the bank (the boards of directors) and the executive authority of the bank (the higher departments), which led to the activation of the role of the boards of directors by approving the bank’s strategy, banking policies and procedures, and determining the acceptable limits and ratios of risks (Risk Appetite).
He stated that "the central bank had an important and effective role in the year 2017 by holding specialized training programs in the field of risk management, combating money laundering, and credit analysis, in which more than a thousand banking employees participated in it throughout the year 2017", calling for "the importance of In the next stage, the government should focus on developing the private sector in all economic sectors and the need to be considered with all understanding, positiveness and serious study of all the demands made by the private sector in all its sub and partial sectors and through the bodies represented to it in the chambers of industry and commerce, businessmen and company owners with everything that would matter To give the private sector new strength, momentum and determination to make more giving and initiative. "
He noted that "The private sector must work in an investment and legal environment that is stimulating and attractive to investment, because encouraging the private sector to actively participate in the economic and social development experienced by the economies of the countries of the world greatly helps the private sector to fulfill its development responsibilities entrusted to it as required, in a manner that contributes to Activating the productive process and creating jobs in the economy and stimulating the export movement, in order to achieve the desired economic growth, and the issue of adopting electronic government has a significant positive impact in increasing transparency and disclosure when addressing the Iraqi citizen, and it addresses issues of citizen participation in the accountability and accountability process by providing sufficient information. On the performance of the government via the Internet and the means of technology (Payment Gateway) and that the e-government program has become imperative for governments to convert to it in line with the requirements of the information age in the speed of completion of work and breaking the barriers of red tape and bureaucracy surrounding the performance of workIn the traditional way and in response to people's desire to obtain easy and fast services that keep pace with the spirit of the times.
The head of the Development Bank said that central banks are the spiritual father of banks, and these banks in European countries and the world have worked to provide a package of measures and initiatives that contribute to reducing the impact of the Corona pandemic on the process of economic and social growth, including the provision of subsidized soft loans that contribute to providing the required financing for companies. Small and medium-sized enterprises, which have a significant role and contribution to the gross national product, and central banks have reduced coverage rates for legal reserves on deposits, in a way that enhances the liquidity position in banks, and in light of the banks postponing the collection of installments from borrowers, and working on scheduling loans in light of The impact of the pandemic on the sales and cash flows of these companies, "stressing that"It is necessary that central banks also, in the coming period, provide more flexible mechanisms and procedures in the aspect of implementing Standard No. (9) for the purpose of calculating credit allocations and in light of the banks ’scheduling and structuring of loans granted, as this matter will contribute to the banks’ maintenance of acceptable levels of profitability and ratios. The regulatory system that allows it to provide appropriate financing products to the sectors most affected by the pandemic, and it is also important in the coming period for central banks to launch specialized initiatives for the industrial, agricultural and commercial sectors so that subsidized loans are provided to the largest segment of companies as this will contribute to reducing card rates as well. Preserving the purchasing power in the market.
The Development Bank is one of the Iraqi banks, in which the number of national employees whose salaries is about (120) thousand employees distributed over more than (110) directorates and government agencies, as the bank provides various electronic services to them through the bank’s branch network that reached (17) Branches inside Iraq, in addition to electronic channels, including automatic teller machines, which reached more than (250) automatic teller machines distributed throughout Iraq.
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