Digital banks in Iraq: the birth of a new financial era
Digital banks in Iraq: the birth of a new financial era
07/21/2025
In conjunction with the Central Bank of Iraq’s efforts to enhance financial inclusion and modernize the banking system, a strategic initiative was launched. This initiative includes developing an instant payments project and issuing local cards, in addition to issuing regulations for licensing digital banks in Iraq.
This step comes as part of a comprehensive plan aimed at integrating modern technological concepts into the financial sector, taking into account the technical requirements of the information infrastructure and the cybersecurity risks that accompany this transformation. The issued report highlights the mechanisms for establishing digital banks in Iraq and explains how to implement this initiative in accordance with the regulations of the Central Bank of Iraq, in integration with local payment systems and global fintech standards, while adhering to environmental and social governance practices that have become essential in the world of modern finance.
The proposed digital bank model focuses on providing financial services electronically, without the need for traditional branches. This includes payment services via apps, digital wallets, transfers, loans, and more, targeting segments of society that are underserved by banking services, including individuals, small and medium-sized enterprises, and rural communities. In terms of objectives,
The initiative seeks to expand financial inclusion, reduce reliance on cash, which accounts for more than 90 percent of transactions, and enhance the resilience of the local economy by supporting small and emerging businesses. It also aims to strengthen adherence to security standards and combat financial crime. The Central Bank’s strategic plan for the period 2014-2026 also focuses on modernizing the financial sector, expanding the bank account base, which does not exceed 30 percent of the population, and developing electronic payment systems. This will contribute to achieving financial stability and attracting foreign investment by aligning regulations with international standards.
Partnerships with international institutions such as the World Bank, the United Nations Development Programme, and the International Finance Corporation are pivotal to the success of this vision. At the same time, regulations adopted in 2024 require strict adherence to cybersecurity and data protection standards, along with building a robust technical infrastructure and implementing effective anti-money laundering systems.
Challenges facing the sector include weak trust in digital transactions, regulatory complexity, financial exclusion affecting more than half of the population, and the risks of cyberattacks due to weak digital infrastructure. Despite these challenges, there are significant opportunities for growth. The Iraqi market is home to more than 45 million people, and there is widespread smartphone and internet penetration. Furthermore, the government is keen to support technology projects in cooperation with global financial institutions, which paves the way for the growth of small and medium-sized enterprises and the transition to a modern financial culture.
Digital payments market analysis reveals advanced demographic indicators, with the number of internet users reaching 35 million, mobile phones reaching 47 million, and the number of digital payment users expected to reach 25 million by 2027, although the adoption rate of these methods remains low compared to the region.
The digital bank’s initial capital has been set at 100 billion Iraqi dinars, to be distributed over five years. Foreign investment may not exceed 49 percent, subject to the approval of the Central Bank. Furthermore, foreign ownership in digital banking projects may not exceed 56 percent per investor, with the possibility of a slight increase if approved by regulatory authorities. This is intended to ensure financial stability and strengthen the operational structure.
An important aspect is environmental, social, and governance (ESG) practices, which include adherence to the sustainable finance roadmap, promoting social inclusion, implementing transparent governance structures, and effective risk management. Establishing a digital bank in Iraq is not only a response to global trends, but also a strategic opportunity to support the national economy and provide modern banking services to a broad segment of citizens. This requires strict adherence to legislation, a flexible operational approach, and the political and economic will to keep pace with the global digital transformation.
alsabaah.iq
