Iraqi Banking Sector to grow with the Economy — 151 percent between 2011 to 2020

By TK Maloy

BAGHDAD — As Iraq finds itself soon midway through 2014, the banking sector has grown markedly in the previous year term, with established names getting larger and new names entering the field.

That said, analysts say that Iraq remains a prime for more banking services, noting in the parlance of the profession that the region is ‘under banked.’ Particularly, for the average citizen, let alone family businesses, advanced banking services are still making inroads.

Also, one of the largest challenges facing the banking industry is access to bank branches or ATM machines. According to experts there are approximately 900 bank branches covering a population of 33 million Iraqis equating to just one branch serving 36,000 individuals.

In a recent Reuters story, Iraqi financial analyst Sabri al-Khalidi told the news wire:  ‘Addressing the Iraqi peoples’ reluctance to deposit their money into local banks is an issue that needs to be dealt with in a transparent and professional manner,” adding, “It is the government’s responsibility and this must be done so that it facilitates financial and economic progress in Iraq.”

But while this somewhat antique prejudice remains, more than ever business operations and the average citizens are nevertheless finding banks and modern banking services part of life.

The chairman of North Bank, Iraq’s largest bank (private), Nozad Dawood Fattah Al-Jaff is bullish on expected banking sector growth for the year, as he told Marcopolis in a recent interview.

‘All the banks will grow and eventually all the banks will meet the targets that have been mentioned by the Central Bank; simply because the Iraqi economy is very big. There is room for many more banks to operate in Iraq in the near future. We are expecting a lot more competition coming from foreign banks but the Iraqi economy is big enough to absorb all of them.’

Concurring with this assessment was a comprehensive report issued by Singapore-based Sansar Capital Management, which noted that banking sector “is poised for significant earnings and asset growth over the next decade driven by a strong macro environment, increasing credit penetration and an improving security situation.” Of the last point, the report was issued before the outbreak of sectarian violence in Anbar province, but the majority of the economic fundamentals that Sansar cites remain the same.

The report’s executive summary noted that the IMF said Iraq’s GDP rate put it well within the category of one of the fastest growing economies in the world. Sansar also mentioned that the IEA in its World Energy Outlook report stated that Iraq is expected to contribute 45 percent of the global incremental oil supply over this decade. As a result, the IEA central scenario forecast predicts Iraq GDP to grow markedly at 151 percent between 2011 to 2020.

Lastly, the report detailed Iraq’s private banking sector through the perspective of five of the country’s largest private banks by deposit. The report reveals that buoyed by strong economic growth and rising credit penetration, these five banks saw their aggregate net income grow by 207 per cent between 2010-2012.

According to North Bank’s Al Jaff, “Our strategy is basically to work as hard as ever. We provide a lot of services for our customers. They are usually very happy with our services and with the fast decisions that we make regarding their demands, whether it be in opening accounts or providing guarantees or even giving them an indication of whether we are able to give them a loan. These decisions can be delayed for weeks in other banks. We are much faster in making these decisions, which opens a lot of doors for us to potential clients.”

“We have given a lot of loans to a variety of sectors in Iraq from agriculture to housing as well as giving bridge loans and loans for fulfilling contracts. We have lot of big loans with the car industry and we have worked successfully with them in importing thousands of cars to Iraq to then sell them to the retailers in the market and to the end users” The North Bank head added.

‘We have a system now whereby people can come and buy cars and pay directly from their salaries. That system has made us very successful in this sector and we are hoping to do the same when we grow further in the housing industry.’