Ali Abdul-Kadhim Daadoush / Ph.D. in Economics – College of Administration and Economics, University of Baghdad

Executive Summary:

The informal sector in Iraq is one of the most prominent sectors that employ – skilled and unskilled – manpower. Because the conditions of employment in it are not subject to the same conditions as the formal sector.

There is a large production base in the informal sector, which produces various goods and services in all fields and specializations. This productive base is a catalyst for the process of economic growth for communities and local markets.

The application of technological innovations to the Fintech industry has attracted tens of billions of dollars in capital in recent years. When these services are developed along with complementary government policies and regulatory frameworks, they have the potential to extend financial services to hundreds of millions of people who currently lack access to funds and finance management.

Adopting a responsive regulatory approach, rather than an overly intrusive one, is the most appropriate framework for promoting financial inclusion and the potential for the shadow economy to become a catalyst for real GDP through innovation and financial technology.

It is necessary for the Iraqi government to absorb – through economic policies – the process of introducing workers and attracting them to this sector, transferring them to the formal sector, and benefiting from them in the process of promoting sustainable economic growth and stimulating it, leading to the development of the private sector in the country.

The digital transformation of financial services in Iraq is still weak, compared to the number of people who use mobile phones and the Internet. Hence the necessity of the actual orientation of the banking system, headed by the Central Bank of Iraq, to enhance the role of the private sector – especially the shadow economy – by cooperating with banks or companies and other financial institutions to achieve the process of financial inclusion. Then we get the real and actual integration between workers in the shadow economy, and the process of achieving real sustainable growth, while at the same time strengthening the role of the private sector in the process of revitalizing the real sectors locally.


This paper aims to examine the impact of technological innovation on the unregulated financial sector in three selected countries: (Kenya, India, and China) as well as Iraq. As financial technology is an industry commonly known as (Fintech). Here we will focus on how fintech is expanding access to finance for millions of people in developing economies. With particular attention to the role of regulatory frameworks in facilitating this process, it is a qualitative analysis of three case studies that have used technology in pursuit of inclusive finance and the promotion of sustainable growth for the economies of developing countries.The cashless payment systems in India and Kenya, for example, and peer-to-peer borrowing in China have achieved important successes in the reality of the economies of those countries.

By inductively investigating the varying degrees of success across cases, the argument will be made that designing an appropriate organizational structure is critical; To maximizing the benefits of technological innovation. More precisely, a light regulatory touch is needed in the early stages to encourage innovation and experimentation. As successful sectors and companies grow, particularly in the informal economy, regulators must adapt the structure to enforce stricter controls and oversight without overburdening the sector with overly onerous compliance requirements. Excessive or poorly planned state intervention at any point in the process can be counterproductive.

In general, the paper will begin by defining key terms, then discussing the relationship between inclusive finance and sustainable economic growth in developing countries. It then highlights the potential for technological innovation to increase financial inclusion with the potential for regulating the informal economy as a tool for promoting real economic growth, paying particular attention to the importance of its organizational structure. Since fintech involves the intersection of both the financial and technology sectors, how it should be regulated (as a financial instrument, a tool, or something entirely different), and the proper design of the regulatory architecture are important mysteries for policymakers and researchers. These puzzles constitute the primary research questions that we seek to address, with a strong focus on the effects of macroeconomic policy that can be drawn from studying the experiences of the selected countries and the extent to which they benefit from the positive and negative effects that those countries were exposed to when applying to the reality of the Iraqi economy.