Banking in Iraq: History, System, and Future Prospects

Iraq's banking system has a rich history dating back to the 1940s, with the establishment of the Central Bank of Iraq in 1947.

The Central Bank of Iraq was created to regulate and manage the country's currency, the Iraqi dinar.

In the 1960s, the government began to nationalize key sectors of the economy, including banking, which led to the establishment of several state-owned banks.

These state-owned banks played a crucial role in providing financial services to the population, especially in rural areas.

The banking system in Iraq has undergone significant changes over the years, with a shift towards privatization and liberalization in the 2000s.

This shift has led to the emergence of new private banks, such as Rafidain Bank and Rasheed Bank, which have increased competition and improved services for customers.

Iraq's banking history is a fascinating story that spans over seven decades. The first bank in Iraq was established in 1941, called the Rafidain Bank, which was a state-owned bank controlled by the Iraqi federal government.

Rafidain Bank has a significant presence in Iraq, with numerous branches across the country. It even extends its services to countries such as Egypt, UAE, Yemen, Jordan, and the UK.

For over fifty years, the Iraqi people relied solely on Rafidain Bank for their banking needs, with no private or foreign financial institutions allowed in the country.

In 1988, the federal government re-branded, re-named, and made over certain Rafidain Bank branches, giving birth to a new brand of banks called Rasheed. The same federal laws applied to both banks.

Today, a staggering 96% of Iraq's banking assets are managed by state-owned banks, according to the U.S. Department of State (2013).

The Iraqi banking system has a unique history. Historically, banks were owned by the state before Saddam Hussein allowed private banks in Iraq during the late 1990's.

The first Iraq bank was established in 1941, and it was called the Rafidain Bank, which is still a state-owned bank controlled by the Iraqi federal government. It has numerous branches over Iraq and even extends to countries like Egypt, UAE, Yemen, Jordan, and the UK.

Currently, 96% of Iraq's banking assets are managed by state-owned banks according to the U.S. Department of State (2013).

The Iraqi banking system has a rich history, and understanding the key players can help you navigate its complexities.

The first two private banks in Iraq were established after the Gulf War in 1991. The Buniyah family founded the Iraqi Investment Bank.

The al-Hafidh family started The Middle Eastern Bank, marking the beginning of private banking in Iraq.

Iraq's banking system is heavily reliant on state-owned banks, which account for a significant majority of the country's banking assets. These banks are responsible for managing a substantial portion of the country's financial transactions.

The Central Bank of Iraq is the main regulator of the country's banking system and has implemented various policies to strengthen the state-owned banks. The bank has also taken steps to increase the efficiency of these institutions.

The Rafidain Bank is one of the largest state-owned banks in Iraq, with a significant presence in the country's banking sector. The bank offers a range of financial services, including loans and deposits.

Iraq's state-owned banks have faced challenges in recent years due to the country's economic instability. Despite these challenges, the banks have continued to play a vital role in the country's financial system.

Islamic Banking in Iraq is a sensitive issue, with many citizens expressing distrust towards these institutions, similar to their views on other Iraqi banking institutions.

The concept of Islamic Banking is based on moral and ethical guidelines derived from Islamic law, as stated by the Institute of Islamic Banking and Insurance in 2014.

Loans are a contentious issue in Islamic Banking, with individuals differing on what constitutes "haram" or forbidden practices, such as interest rates.

Iraqi banking customers are primarily concerned with efficient, easily accessible banking services that increase the speed and reliability of money transactions.

Private and state-owned banks in Iraq need to adapt to modern banking technologies and services to meet the evolving needs of their customers.

Banking in Iraq faces several challenges and issues. One major obstacle is the country's high inflation rate, which has led to a significant devaluation of the Iraqi dinar.

The lack of a well-developed payment system is another issue, with only 20% of the population having access to electronic payment methods.

Corruption is also a significant problem, with many banks and financial institutions being accused of bribery and embezzlement.

In Iraq, there's a significant lack of trust in the financial system, mainly due to the country's unstable history and numerous scandals. Stories of corruption, bribes, and scandals in both Central and Private banks are consistently circulated among citizens.

The volatile political situation, including corruption and tenuous security, has made it difficult for private banks to operate. Many scandals related to private banks have affected the overall reputation of the private banking sector.

Only an estimated 10% of people in Iraq have and/or use a bank account, which highlights the extent of the distrust in the banking system.

The Iraqi Dinar, once a stable currency, was ravaged by inflation after the invasion of Kuwait in 1990. The official value of the Iraqi Dinar (IQD) before the invasion was 1 IQD = 3 USD.

The Security Council's economic sanctions on Iraq led to a frantic withdrawal of money from banks, with citizens trying to get their hands on as much cash as possible. The Central Bank of Iraq declared it had the right to withhold funds for an indefinitely long period of time.

The sanctions severely impacted the value of the IQD, with 10,000 IQD worth a mere 200 USD within months. The Iraqi government's reckless printing of trillions of dinars further exacerbated the inflation.

The value of the IQD continued to plummet, with the 1 IQD eventually worth a mere 0.0002857 USD by the time of the American invasion and liberation of Iraq in 2003.

Obtaining loans in Iraq is a lengthy process that involves providing guarantees consisting of documents showing mortgages and property ownership.

The process is often described as bureaucratic, and once loans are approved, they pay for only a fraction of the requested amount.

Loans in Iraq require a large deposit and come with high interest rates.

You have to pay back the loan within three years, which can be a significant burden for individuals and businesses.

According to The World Bank, Iraq ranks 180 out of 189 economies on the ease of obtaining credit, which is a staggering statistic.

This ranking highlights the significant challenges faced by entrepreneurs in Iraq who need access to credit and loans to grow their businesses.

Iraq's GDP is expected to grow 6.% in 2014, but the lack of ease in obtaining credit and loans could hinder this growth.

Iraqi banks now offer a wide range of modern banking services to their customers.

Online banking is a popular option, allowing customers to manage their accounts and make transactions from the comfort of their own homes.

Many banks in Iraq also provide mobile banking services, which can be accessed through smartphone apps.

This has made banking more convenient and accessible for people with busy lives.

Some banks even offer real-time account updates and transaction notifications, keeping customers informed and up-to-date.

E-Banking has a long way to go in Iraq, with few methods available to citizens.

Text-based bank account updates are offered by some banks, but these services often come with a fee and can be rescinded without notice to the customer.

Iraqi citizens have found alternative ways to maintain their wealth, such as keeping money in banks as a safekeeping measure to avoid theft from residences.

Gold has maintained its value through war and sanctions, and some citizens prefer to keep their wealth in gold rather than in banks.

The government's guarantee of deposits at state-owned banks is an additional incentive for citizens to use these banks, with 89% of public sector deposits and 63% of private sector deposits controlled by state-owned banks in May and June 2013.

Transferring money outside Iraq can be a challenge. The central bank has issued strict rules, making it difficult to transfer money outside the country.

One way to dodge high bank transfer fees is to use Western Union, which has a reduced transfer rate compared to Private and State banks.

In many countries, credit and debit cards are a convenient and secure way to make transactions. Credit cards and debit cards can be used for payments, especially when traveling or conducting business abroad.

Carrying credit and debit cards can be a better option than cash in certain situations.

In Iraq, for example, ATMs are relatively rare, and many local businesses don't have card readers. This limits the use of debit and credit cards.

Banks in such areas may issue fewer debit and credit cards to their customers.

ATM services can be a hassle, especially when you need to withdraw or deposit money urgently. Rarely do ATMs exist as an alternative to visiting the bank in person.

Existing ATMs are often unreliable, and customers have to report problems during business hours. This means your urgent need for money can become a lengthy procedure to rectify the issue with the bank.

You're limited to a daily withdrawal limit, which can be frustrating if you need to withdraw a large amount of money. At times, people use Western Union to conduct rapid and large money transactions, but the preference is to use the bank due to the expensive fees garnered by Western Union.

The financial sector in Kurdistan is a rapidly growing industry, with a strong focus on banking and finance.

The Kurdistan Region has its own central bank, the Central Bank of Kurdistan, which was established in 2004 to regulate the banking sector and manage the region's monetary policy.

The Central Bank of Kurdistan has implemented various policies to promote economic growth and stability in the region.

Kurdistan's banking sector has seen significant growth in recent years, with the number of banks increasing from 10 in 2003 to 27 in 2019.

The banking sector in Kurdistan is also driven by foreign investment, with many international banks operating in the region.

The Iraqi dinar is the official currency of Kurdistan, and it is widely accepted in the region's banking system.

The banking system in Kurdistan is well-developed, with a range of services available to customers, including online banking and mobile banking.

In Baghdad, you can find several financial companies that offer a range of services. United Company for Financial Baghdad has two locations on 14 Ramadan Street.

The company Al-Maraj Al-Alamiya Co. for Money Transfer is situated on End Attar Street of Karrada. It's near the Daistar company.

Al-khair Financial Investment Company PLC is located in Karrada on Indian Street Arsat. You can reach them at 939.

Al-Wiaam Financial Investment Co. is found on Street Al-Nidhal, near the White Palace building.