Dr. Salam Jabbar Shihab: Researcher in Political Economy

Dr. Ali Abdulrahim Al-Aboudi: Ph.D. in Political Economy


There is a need to unify the efforts of financing institutions in Iraq to gain a deeper understanding of the needs of the groups applying for these types of loans. It is noted that smaller financing in Iraq is often driven by political or social considerations, and economic considerations are often excluded, failing many small projects. The entities that are assigned to approve funding for small projects require a deep understanding of the feasibility, efficiency, repayment capability, and sustainability of the projects. It is necessary to consult with the private sector, unions, associations, and federations because they provide a clear reading of the market needs and business trends. The focus should be on building an intelligent database capable of classifying beneficiary categories, automating transactions and beneficiaries, and preventing the use of paper tools in granting loans. Privileges must be granted to projects that grow more than planned and achieve successful outcomes through smart project management.


Banks in Iraq still suffer from structural weaknesses in terms of type and quantity, especially after years of economic transformations. Banks have not grown at rates that are consistent with the population composition or the geographic diversity of economic activities. The number of banks in Iraq is 73 banks (Central Bank of Iraq, 2019), with seven of them belonging to the public sector with a capital of $2.9 billion. Sixty-six private banks have a capital of $10 billion, representing 77.4% of the total capital. Loans represent most of the credits granted by operating banks in Iraq, accounting for 84.2% of the total credit balance. The sectoral distribution of “cash credit” facilities is as follows: community services (35.9%), construction sector (25.3%), wholesale and retail trade, hotels and restaurants (15.5%), and others (23.3%) (Central Bank of Iraq, 2019).

In general, the loans provided to the government are greater than loans to the local sector, and private banks are more willing to grant large loans rather than small loans. This preference is based on the principle that the larger the company, the greater it’s chance of obtaining a loan due to the credibility of larger companies being better than smaller ones. At the same time, the period has formed a barrier to smaller financing. Therefore, the Central Bank of Iraq tried to reduce this obstacle by adopting a package of regulations to facilitate the granting of loans for smaller financing by launching its loan initiative in 2019 in collaboration with private banks. This initiative aims to encourage these banks to lend more money by providing more credits and bank financing to provide an incentive to the local market. This was done through the Trillion Iraqi Dinar Initiative to finance small and medium projects by financing private banks with an amount of 71.6 billion Iraqi dinars, in addition to extending the payment period from five years to seven years. The actual amount granted by these private banks was 58.9 billion Iraqi dinars, and with this initiative, the funds were disbursed to the benefiting projects, which reached 1973 projects, as follows: (Central Bank of Iraq, 2019).