by admin | May 24th, 2013
Considering the volatile investment environment of Iraq – which includes internal conflict, low dinar exchange rate, fragile security, and political instability – it’s not so difficult to understand why any type of business (except for the giant oil corporations) – would be hesitant in expanding their trade within this Middle Eastern nation.
Regardless, dinar news reports indicate that several foreign banks are still interested in investing in the future of Iraq. To understand the significance of their decision to push forward, it’s important to see what type of “hurdles” they’ll be pushing through along the way.
First and foremost, there are currently 54 banks operating in Iraq – 32 private, 15 foreign, and 7 state-owned. Regardless, two state-owned banking institutions are handling the majority of the country’s business. Private entities are currently deprived of reaching their full potential because public sector funds can only be accessed by banks operating within the public sector. These establishments have the right to draw funds the oil industry, which means they have access to massive capital.
On the other hand, their private counterparts may only acquire funding through the manufacturing and construction industries. To make things even harder is the Central Bank of Iraq’s implementation of a minimal capital policy. According to the rules, businesses are required to have a capital of no less than $215 million. Not only that, but the deadline for the capital is schedule for this June.
The adequacy of funds has become a major issue for numerous banks, as some refused to merge or become consolidated by others. While other establishments have decided to shutdown, other foreign banks have decided to press on.
Dinar news reports say that the most prominent force that’s attracting new banks is the nation’s booming oil industry. The Standard Chartered Bank, for example, is planning to open an additional three offices in Iraq. This establishment’s goal isn’t primarily geared towards finding new customers, but for supplementing the needs of their existing clients, many of which are in their advance stages of growth.