Inefficient state banks weaken the Iraqi economy


Aseel Kami and Yara Bayoumy
BAGHDAD (Reuters) –
complains about an Iraqi businessman tries to gain billions of dollars flowing into the country from the oil contracts profitable that most bother him not bomb attacks or political sectarianism, but the banking system primitive., says the businessman who is a car company foreign Iraq has refused to be identified because of his dealings with the government, “where credit card?” Pointing out that it is used widely in other Gulf countries.
“The extent to which we are immune to this development?”
and feelings of frustration that he feels are common among investors who deal with the banking system is sophisticated and bureaucratic and corrupt sometimes where they can find it difficult to make the simplest of transactions Banking: Settlement of bank checks.
and the absence of an efficient system impedes progress of the country while rebuilding the economy after the era of the former regime which was characterized by weak investment and unrest that followed the US-led invasion in 2003.
and without the banks involved in the global system is likely to continue reluctance of foreign investors from outside the oil sector in undertaking massive investments in Iraq.
The weakness of the banking sector in two ways First, the dominance of state-owned enterprises, which lack the systems, modern banking and the second the presence of a large number of private banks, small is in many respects more like tanks family, including a financial institution and a national.
, says Abdul Aziz al-Hassoun, President of the Association of private banks: it’s there in Iraq more than 45 banks, including seven state-owned banks and accounts for 85 percent of banking assets, or about 41 trillion dinars (36 billion dollars).
and say, “What do you do? do not invest the money in the market does not engage in banking activities, is still Iraqi banking system suffers from the same problems that existed before about ten years ago, a handful of state banks merely reservoirs to government accounts, no more. ”
said Bank of Dar es Salaam Iraqi investment in a report last November that it is in Iraq about 900 bank branch serves a population of about 30 million people. The report said that there are more than 600 branches in neighboring Jordan to serve a fifth of that number of the population.
According to the report based on the latest data published by the Central Bank that the volume of bank loans in Iraq has reached $ 5.8 billion in the first half of 2010 compared with $ 20 billion in Jordan, The World Bank estimates that the volume of bank credit to the economy of the country amounted to $ 8.1 billion in 2010, or 9.8 percent of GDP, compared with 55 percent on average in the countries of the Middle East and North Africa.
and conduct most banking transactions through the two institutions-governmental organizations, banks, Rafidain and Rasheed, was the nationalization of private banks in 1964. And allowed to operate again in the nineties, but their activities remain mostly limited to the deposit and lending services profile.
harmful and said Kassem, deputy governor of the Iraqi Central Bank: The biggest weakness of the state banks is the lack of an internal network linking branches. They also find it difficult to electronic settlement of checks to the lack of electronic communication system of payment of the Central Bank.
and said Kassem told Reuters from his office in central Baghdad that the bank Rafidain and Rasheed dominate 83 percent of banking activities in Iraq, adding that the ratio of up to 90 percent when you add all the state banks, although that their potential technological non-existent.
, says Iraqi businessman who represents a company car that Rafidain Bank refused to cash a check he issued from a branch, adding that the trip to the branch the original six-hour drive, and added that he was forced to cancel the check and cashed in cash after being shot by despair.
but mobility bags replete with cash from dangerous in a country where bombings and kidnappings, shootings a day. Presents the central bank and the Ministry of Finance of bomb attacks in recent years and are still targeted.
To reach the Office of Qasim convey journalists behind the walls for the prevention of explosions, barbed wire and go through three checkpoints and are subject to strip-search, and searching bags and ask them to leave their mobile phones.
said businessman told Reuters: “In the end I had to set up an account of the company in Turkish Bank in Arbil, “a Kurdish city in northern Iraq enjoyed a boom in investment to its existence in the only part of the country who escaped to a large extent of the violence over the past ten years.
A report by the World Bank: The Rafidain and Rasheed, “lacked efficiency and suffered the legacy of the previous losses as well as those resulting from the activities of quasi-fiscal “activities that relate to the policy of government spending and not the interests of the private commercial. The World Bank said that the government needs to clean up banks’ balance sheets and strengthen oversight of the financial system and the achievement of equality to allow private sector competition.
However, political differences and conflicts between governmental entities raise doubts on the reform of state banks in the near future.
Kassem said: Corruption is rampant in the government-owned banks, although activities weak and can not anyone be touched because it is a government and everyone is afraid.
could not be reached for officials from the Rafidain Bank for comment despite several attempts to contact them.
and head of private banks for the use of technology more sophisticated ATM and credit cards but are generally small entities that focus on the activities of the family is lack of big money for activities and large-scale or expansion across the country.
In 2009, the development of the Central Bank of a program implemented Thelathmrahal to increase the capital of these banks are obliged to raise the minimum capital to $ 128 million by June 2012 and up after another year to $ 213 million.
In a sign that some banks may find it difficult to attain the minimum capital requirements the central bank said last week he was subjected Warka Bank for the private tutelage of watching him through the process of
bankers are likely to collect most of the banks’ required capital using the profits Almtbakah. Late last year the World Bank said there are “doubts about the financial strength of many banks,” but most of them including the Rafidain and Rasheed has an abundance of liquidity seems to be the financial system as a whole will not be exposed to great danger.
may contribute to access out of foreign banks in the development of the sector. Since early 2006, bought many of the foreign banks’ stakes in local banks, including the acquisition of HSBC. S. Me. C a stake in Bank of Dar es Salaam and the purchase of Qatar National Bank of a stake in Mansour Bank and the acquisition of National Bank of Kuwait stake in Credit Bank of Iraq.
said Hassoun : It is expected to start banks from Lebanon and Turkey to work in the country by June, and linked to the two strong trade ties with Iraq.
It is hoped that over the foreign presence from the opening of Iraq to global markets and attract more foreign investors and foreign banks.
Kassem said: that this would enhance integration with the global financial system and supporting trade and investment climate.
He added that the Central Bank in the early stages of the reform of banking laws to include separate legislation on the activities of Islamic banking as well as the item is required merger of entities that do not meet minimum capital requirements.
did not know Iraq Islamic banking in the era of the system dictatorial, but Islamic banks operating in the country now in the absence of a law regulating their activities.
Kassem said: It should be updated in the Banking Act as it stands now belongs to an era gone.
but the goal difficult to achieve in light of conflicts between political parties are hampered by the issuance of a lot of legislation in the Iraqi parliament.
and even in the case of the reform of the Banking Act and the restructuring of state banks and the entry of a large number of foreign banks and the integration of small banks, the creation of a culture based on providing banking service real Iraqi banks requires some time.
said Majid picture, a banking analyst in Iraq, “the problem of restructuring is not an issue superficially simple but restructuring of the work environment as a whole and you need years and years to make a difference.