IRAQ | Banking Sector

[Ali - Iraq]

Iraq held back by slow pace of bank reform
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Iraq’s push to attract international financial services companies could be undermined by a lack of banking reform that industry insiders say is also hurting the wider economy.
As Baghdad officials pop up in London and other western financial centres to woo foreign investors to their oil-rich country, the banking industry remains dominated by state banks, still ailing after the Saddam Hussein years.
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While the slow pace of reform deters some international financiers, the bigger worry is that it is also choking the oil-rich economy where businesses rely on credit to expand. Without progress on restructuring its banking system, Iraq’s $130bn economy has little hope of competing with its Gulf neighbours.
“When we talk about reconstruction, rebuilding, it’s not only infrastructure, it’s everything, the whole system,” Rowsch Nori Shaways, deputy prime minister of Iraq, told the Financial Times at a recent investor conference in London. “To do this you need a modern banking system.”
But building that system has been proved to be an elusive task. The government often talks about the need to work harder on fixing the banking system but as the World Bank suggests in a report last year, the fundamental decision of what role the state banks will play in a modern financial system in Iraq still needs to be taken.
Before luring more international investors to Baghdad, the government has to make the financial services sector more appealing to the private sector, bankers say. At present, 36 private sector banks struggle alongside seven state lenders in what remains an uneven playing field.
An important impediment to the profitability of private sector banks is that the government and its state-owned companies, which take up the lion’s share of gross domestic product, are only allowed to deposit with state-owned banks. In addition, state companies cannot take loans from private banks. Taxes and any payments to the government can only be made through state banks.
State-owned banks also enjoy an implicit guarantee from the government, meaning that customers prefer to deposit with them rather than take the risk associated with a private sector bank, says Rayd Abu-Ayyash, head of strategic planning at Capitalbank, a Jordanian bank that operates an Iraqi unit.
While the state banks enjoy their advantages, two of the biggest state lenders, Rasheed and Rafidain, are still far from completing their restructuring, first agreed in 2006. Their balance sheets – ripped apart by looters during the nine-year US occupation, debt under Saddam’s 24-year dictatorship and dramatic changes in the exchange rate – remain in the quagmire that they were six years ago.
“Little progress has yet been achieved, including in the technical area of cleaning up the two banks’ balance sheets,” the World Bank said in its in-depth report on Iraq’s financial services sector published last year.
Officially, the Iraqi government accepts the need for financial reform, making the delays even more perplexing. “The state banks still dominate the banking sector,” says Ali Allawi, a former finance minister of Iraq. “The starting point must be the restructuring of the state-owned banks.”
Analysts suggest restructuring has been delayed because the government is to some extent comfortable with the state banks’ undertaking of fiscal activities. They also say that the banks’ restructuring may force more transparency on the government’s fiscal activity, a move that it may not yet be willing to take.
Restructuring of the state banks is “still slow”, says Mr Abu-Ayyash of Capitalbank. “Some of the reluctance of international banks to enter is caused by that.”
International lenders can see the potential for business in Iraq, which remains very under-banked. Banking assets represent 73 per cent of gross domestic product compared with 130 per cent in the Middle East and North Africa, according to the World Bank.
Despite a tough retail and corporate banking environment, Mr Allawi points to the opportunities that international investment banks can take in the restructuring of the banking sector itself, with the prospect of earning fees of $1bn to $2bn, he estimates.
International investment banks including HSBC are already involved in the planned initial public offerings for the Iraqi stock market. However, the three long-awaited IPOs in the telecoms sector, that are set to give the stock market a significant boost, are yet to materialise. Morgan Stanley, which was among the international banks represented at Iraq’s recent investor conference in London, are no longer a bookrunner on the IPO of Asiacell, one of the telecom operators, it was revealed this week.
Aside from the state banking concerns, international market players are also concerned about Iraqi links to banks in neighbouring Iran that face US sanctions.
Under US banking sanctions, foreign lenders face being cut off from the US banking system if they deal with designated Iranian banks. The US imposed sanctions on Iraq’s Elaf Islamic Bank in July for providing financial services to such banks.
While the possibilities are still there for international banks, a lot of the financial reforms to make it profitable for them “are still in the realm of planning”, says New York-based Zaab Sethna, partner at Northern Gulf partners, which invests funds in Iraq.
Or as ex-finance minister Mr Allawi puts it: “You have to have an appetite for a ride on the rollercoaster, but that is becoming less amplified.”
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[Ali - Iraq]

Central Bank of Iraq launches mechanism to support local banks

Added by Baghdad Iraq on December 12, 2012.
Saved under Business & Iraqi Dinar
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Baghdad (IraqiNews.com) -The Central Bank of Iraq decided to include a number of local banks in the foreign currency auction and increase the financial shares granted to the banking companies.

A statement by the CBI cited “Within the framework of the CBI’s efforts to develop its monetary policy and support the national economy, the managing council of the Bank took many measures including attracting several local banks through opening the bonds and financing them by the CBI according to specific mechanism set for this purpose in addition to allow these banks to take part in the currency auction.”

“It was also decided to grant the governor of the CBI power to decrease the US dollar price which is IQD 1179 for one dollar as an enhancement to the cost of the Iraqi dinar according to the requirements of the market,” the statement concluded.



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[Ali - Iraq]

Private Bank Earnings Jump 90%
Posted on 04 January 2013. Tags: Bank of Kurdistan, North Bank, United Bank for Investment

By John Lee.
Twenty-two of Iraq’s 30 private banks made a combined profit of $366 million (427 billion Iraqi dinars) during the first nine months of the year, according to a study released by the Association of Private Banks in Iraq.
Al-Hayat newspaper says this is a 90 percent increase in profits over the same period in 2011.
North Bank for Finance and Investment topped the list with a profit of 105 billion dinars, followed by the United Bank for Investment with 75.1 billion dinars, and the Bank of Kurdistan with 52.2 billion dinars.
Munther Kaftan, the managing director of North Bank, said he experts to merge the weaker banks together in order to improve their capabilities and offerings, allowing them to develop into more modern institutions.

[elusive]

BLF to open first branch in Baghdad
February 12, 2013 12:54 AM

BEIRUT: Banque Libano-Francaise recently announced the opening of its first Baghdad branch, which will serve Lebanese and Iraqi businessmen as well as international companies.

According to the bank, establishing a physical presence in Iraq is a strategic choice that comes in line with its expansionary goals. BLF says it is embracing a global expansion strategy to maintain a closer relationship with Lebanese abroad.

Over the last few years, the bank has expanded from Lebanon to establish a presence in France and Cyprus (Banque SBA), Switzerland (LF Finance Suisse), Syria (Bank Al-Sharq), the United Arab Emirates (Representative Office in Abu Dhabi) and Nigeria (Representative Office in Lagos). It will also open more branches in the next couple of years in Lebanon.

Read more: http://www.dailystar.com.lb/Business...#ixzz2Kg2QIFts
(The Daily Star :: Lebanon News :: http://www.dailystar.com.lb)

[Ali - Iraq]

7 Agricultural banks established in Iraq

Added by Ibrahim Khalil on March 20, 2013.
Saved under Business & Iraqi Dinar



Baghdad (IraqiNews.com) -The Ministry of Finance announced founding seven new banks specialized in agricultural affairs.The Acting Minister of Finance, Ali Shukri, reported in statement received by IraqiNews.com on Wednesday “Seven new agricultural banks were established in Baghdad, Babel, Kirkuk, Diwaniya, Dhi-Qar and Maysan.””This procedure aims to facilitate obtaining the loans by the farmers,” the statement added. \



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[sheytanElKebir]

7 new banks or 7 new branches?

[BigDreamer]

i'm sure they mean branches

[Ahmed-1]

Could someone please explain what are they trying to do?? I'm kind of confused

السومرية نيوز/ بغداد
أعلن البنك المركزي العراقي، عن أطلاق مشروع الدفع بالتجزئة من خلال الموبايل، داعيا 30 شركة عالمية إلى تقديم عطاءاتها لتنفيذ المشروع.

وقال البنك في بيان صدر عنه، وتلقت "السومرية نيوز" نسخة منه انه "تم أطلاق مشروع تطوير الدفع بالتجزئة من خلال إنشاء المقسم الوطني والمنصة التبادلية للدفع بالموبايل"، مبينا أن "المشروع يأتي في أطار تطوير الصناعة المصرفية في العراق وإضافة أدوات جديدة ومتقدمة في مجال المدفوعات الالكترونية".

ودعا البنك "أكثر من 30 شركة عالمية متخصصة بهذا المجال إلى المشاركة في تقديم العطاءات لتنفيذ هذا المشروع الوطني"، مشيرا إلى أن "البنك سيستعين بأفضل الشركات العالمية لتنفيذ المشروع وفقاً للمعايير الدولية المعتمدة في مجالات الدفع بالتجزئة".

ويوفر نظام الدفع بالتجزئة المتبادل بالهاتف النقال العراقي الفرصة للمصارف العراقية ومشغلي شبكات الهواتف المتنقلة لقيادة العالم على نطاق واسع في الوصول إلى الأدوات المتكاملة الأكثر حداثة وتطوراً للمدفوعات النقدية.

وستكون فوائد النظام المقترح أكثر وضوحا للعراقيين العاديين من خلال توفير الخدمات المصرفية على النظام العالمي لهواتف الاتصالات المتنقلة (GMS)، الذي صمم هذا النظام لضمان إمكانية استخدام أبسط أجهزة الهواتف النقالة بنظام GSM لتقديم الخدمات المصرفية المتطورة لضمان أن الخدمات المصرفية متاحة لأي شخص في أي مكان وفي أي وقت.

ويعتبر نظام GMS أو النظام الموحد للاتصالات المتنقلة هو الجيل الثاني من نظم الاتصالات الرقمية الخليوية ، ويمتاز هذا الجيل بسعة أو قدرة للنظام أعلى بعدة مرات من النظام التماثلي كما أنه يقدم ميزات خدماتية أكثر وبنوعية عالية الجودة وتكلفة منخفضة.

[Ali - Iraq]

Sharia lenders team up to fund Iraq's promising food sector
A private bank in Iraq has become the first among its peers to launch a local fund that will be marketed to foreign investors and regulated outside the country.

Iraqi Islamic Bank for Investment and Development, the country's oldest Sharia-compliant private lender, has teamed up with a Bahraini bank to develop an investment vehicle that will target one of Iraq's lucrative and promising sectors - food.
With a population of more than 31 million people, the fund has already acquired sizeable interest from Arabian Gulf and European investors, prompting the Iraqi lender to increase the size of the vehicle from US$50 million (Dh183.6m) to $75m.

In partnership with Baraka Islamic Bank, based in Manama, the fund will provide financial support to an affiliate company of Iraqi Islamic Bank that has a three-year track record of delivering contracts on sugar stockpile to Iraq's ministry of trade.
According to the bank's prospectus, seen by The National, Baraka Islamic Bank will act as a manger of the fund, while Iraqi Islamic Bank will act as the issuing entity, providing the Iraq lender's affiliate a diversified source of funding and access into the international market.
The Bahraini lender will also market the fund, regulated by the Central Bank of Bahrain, through its own platform at its units in the region, including Algeria and Suda


The fund will be sold in tranches of a minimum investment of $100,000 in a roadshow planned to take place from the end of this month to early next month in Manama and Dubai.
"It's the first time we see something from Iraq's private banks of that magnitude," says Ahmed Al Fawz, the chairman of Islamic Bank of Iraq.
"Bahrain's central bank is one of the strongest, restrictive and conservative regulators in the region, so its a merit for us to have the fund monitored by them."
A decade after the US-led invasion of Iraq, private banks are expanding their services in a country where growth is expected to top 9 per cent this year, according to IMF estimates, amid a surge in consumer power as petrodollars trickle down to businesses and consumers.
There are 37 banks in Iraq, with the sector dominated by seven state-owned institutions. There are seven foreign banks, with seven more in which foreign banks hold stakes in Iraqi counterparts.
The remainder mainly comprise small private banks owned by affluent Iraqi families.
Iraqi Islamic Bank was set up in 1992 by AbdulMajeed Alani, a prominent Iraqi banker who served as the chairman of two government-owned lenders, Rafidain Bank and Rasheed Bank.
He was also was a founder and served as the deputy general manager at Bahrain's Gulf International Bank.
The lender illustrates how Iraq's old-money elite are playing an active role in growing the banking sector and reconstruction of the country. Two years ago, a group of investors acquired a controlling stake in the bank, in a bid to inject liquidity and boost the company's profitability.
The shareholders come from old and rich Iraqi merchant families, with the likes of Al Sarraf, whose bread and butter has come from foreign exchange for more than a century.
"We brought different people who are known for being the best in their [different fields]. The wealthy families are well known in Iraq. They were offered positions on the board with a role in developing the bank's business in their respective industries of expertise," Mr Al Fawz says.
The lender's history and track record has helped it acquire preliminary approval from the UAE Central Bank to establish a representative office in Dubai. Bank officials are considering locating the office near Emaar Square, a business centre that houses branches of HSBC and Barclays.
"We met the initial criteria. We are the first Islamic private bank in Iraq, and more than 10 years old," Mr Al Fawz says.


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http://www.thenational.ae/thenationa...ng-food-sector

[Sinjar]

Standard Chartered to open branch in Iraq seeing loan growth

By Bloomberg News- May 14, 2013

Baghdad: Banks in Iraq, where fewer than one in five people hold an account, are set for growth in earnings and assets as a surge in lending in Opec's second-biggest producer outpaces the region.

Standard Chartered plans to open branches this year in Baghdad and the city of Erbil, followed by a third next year in the oil hub of Basra, said a bank official who declined to be identified because of company policy. Total credit in Iraq amounts to nine per cent of gross domestic product, compared with an average of 55 per cent in the Middle East and North Africa, according to Singapore-based Sansar Capital Management, which runs a fund with $30 million invested in Iraqi equities.

"Earnings are really soaring in Iraq" despite the violence that occurs daily, Sansar President Sanjay Motwani said in an interview in Dubai. "Domestic credit growth in the last two years has been 89 per cent." Iraq's rising oil exports and a drop in the prime lending rate from 16.8 per cent in 2008 to six per cent today are feeding the expansion. The five largest privately owned banks boosted their combined net income by 207 percent from 2010 to 2012 and more than doubled earnings per share, according to a Sansar report on Iraqi banking. The International Monetary Fund forecasts the economy will grow nine per cent this year, the fastest pace, after Libya, among 18 countries in the region.

Iraq holds the world's fifth-largest proven oil deposits and is budgeting $118 billion in spending this year, up 18 per cent from 2012. The central bank, supported by the IMF, has stabilised the Iraqi dinar at about 1,170 to the dollar and has curbed inflation to single digits from a peak of 80 per cent in 2006. Foreign reserves stand at about $70 billion, up from $50 billion in April 2010. The Iraq Stock Exchange drew investors in February when mobile operator Asiacell Communications listed after a $1.3 billion share sale, in the Middle East's biggest initial public offering since 2008. The country's two other mobile operators, Zain Iraq and Korek Telecom, plan to list on the bourse soon to comply with their licence requirements.

Costs drop
The cost of insuring Iraqi debt against default for five years has fallen 154 basis points, or 1.54 percentage points, to a 14-month low of 367 on May 3 after reaching a six-year high on February 5, according to data provider CMA. The drop compares with an average decline of 12 basis points to 254 for the Middle East over the same period. Iraq's contracts were at 388 basis points on Monday.

Lending by closely held banks increased 42 per cent last year compared with 2011, Abdul-Aziz Hassoun, executive director of the League of Private Banks, an Iraqi business group, said in a telephone interview from Baghdad.

Banks now charge rates of 10 per cent to 12 per cent, compared with more than 20 per cent in 2008 when the prime rate was about 16 per cent, he said. Loans are growing from a low base in a market long dominated by state banks. Iraq has one ATM for every 100,000 residents, compared with a regional average that's 32 times higher, according to Sansar's report. Most Iraqis are still unbanked, said Jawad Mian, who is setting up a global macro hedge fund that's considering investing in Iraqi stocks.

Overseas lenders
Foreign banks were barred from the country until after the U.S.-led invasion that ousted the regime of Saddam Hussein. Today, 15 international banks operate there, competing with seven state banks, 23 private lenders and nine Islamic banks, according to the website of the central bank.

Standard Chartered plans to open branches to cater better to clients involved in Iraq's power, oil, telecommunications and construction industries, the company official said.

[Sinjar]

EMP to partner with Horizon Scope in Iraq

Iraq: Saturday, May 25 - 2013

Emerging Markets Payments (EMP) has signed an agreement with Horizon Scope to promote EMP's third party card processing services to banks in Iraq. The agreement was signed by Paul Edwards, EMP Group Chairman, and Yazan Al Sabbagh, Horizon Scope Executive Director.

"We are delighted to announce our partnership with Horizon Scope. As we continue to expand across the Middle East, we will aim to strengthen our position by partnering with industry leaders, such as Horizon Scope. We are committed to growing our presence in Iraq and the region, and in doing so providing world-class, reliable processing services to our clients," said Paul Edwards, Chairman of EMP.

"Over the years, we have built a well-founded reputation across the markets of the Middle East and Africa as the leading smart card processing company. We handle the processing requirements of 135 banks, 30 000 retailers, as well as governments and consumer finance institutions, in 45 countries and support all card associations and all electronic distribution channels."

EMP is expanding its business in the Levant and Iraq. In Jordan it operates the national ATM switch, JONET, and has an 85% market share for merchant acquiring. As part of its focus on expanding into Iraq, it concluded an agreement with The Bank of Baghdad in 2012 to provide card hosting and transaction management services, as well as card personalization, and ATM and POS driving.

Commenting on this partnership Yazan Al-Sabbagh, Executive Director of Horizon Scope, said "We have been successfully operating in the Iraqi market for a long time, and have demonstrated our commitment to always offer innovative financial solutions to our clients. Moreover, we are proud of this mutually beneficial alliance with EMP, which is in line with our strategy to enhance and develop the country's banking sector in general and its card industry in particular."

Horizon Scope is a subsidiary of ARCHS Group and specializes in providing cutting edge solutions in the fields of telecommunications and information technology. Horizon Scope will be handling marketing activities on behalf of EMP in Iraq. Horizon Scope currently operates 8,000 terminals across Iraq to enable airtime purchases.

[Sinjar]

Iraq Trade Bank to expand into Lebanon, Turkey

State-owned Trade Bank of Iraq (TBI) plans to expand its domestic presence as well as open branches in Lebanon and Turkey to tap growing trade between the countries, the bank's top executive said on Thursday.

The bank, set up in 2003, operates as a commercial bank with a virtual monopoly on letters of credit, which are used in international trade to guarantee government purchases.

TBI is awaiting approval from the Lebanese authorities and plans to apply soon for a licence in Turkey, Hamdiyah al-Jaff, president and chairwoman of the bank told Reuters in an interview.

The bank has 16 branches across Iraq will add three new ones there in 2013, she said.

"We are seeing growing trade activities between Iraq and countries like Lebanon, Turkey and the United Arab Emirates and we would like to expand our commercial operations and credit portfolio," she said on the sidelines of an energy conference.

Al-Jaff said there was a growing Iraqi population in those countries, and TBI would look at entering the UAE when the opportunity arose.

The bank's core business is trade finance but it also plans to be active in project finance, industrial and agricultural finance.

"A lot of projects are coming up in Iraq in different sectors, so we want to be part of this."

Iraq has big plans to build oil export infrastructure to meet an anticipated hike in crude production but lacks sufficient funding after years of war, sanctions and decline that left its economy shattered.

TBI is involved in an $18 billion project to build an oil pipeline between Basra in Iraq and Aqaba in Jordan, she said, without elaborating as plans are still being finalized.

Unlisted TBI, whose net profit grew 34 percent last year, expects similar or higher growth in 2013 as it expands its business, she said, adding that bank made a net profit of $488 million last year, its highest in the past four years.

The bank, which started with capital of $100 million in 2003, is capitalized at around $800 million. – Reuters

[Sinjar]

CBI to begin applying measures to reduce exchange rate volatility

Wednesday, 29 May 2013

Shafaq News / Parliamentary Finance Committee confirmed on Wednesday, that the Central Bank of Iraq (CBI) will begin implementation of a package of measures next month to restore the exchange rate of the dollar against the Iraqi dinar to normal and prevent repeating exchange rate volatility.

The value of the Iraqi dinar declined gradually over the past weeks so that the price of per dollar would reach about 1129 dinars after it had been stable for 1120 dinars, the highest rate up to the exchange rate during the past two years.

“ CBI told the Finance Committee that it will begin next month, the application of measures to curb the rise of the dollar against the Iraqi dinar, as some of these measures were not disclosed by details , the measures are strictly confidential,” The Committee’s member , Haitham al-Jubouri told “Shafaq News”.

“One of the most prominent measures that CBI will begin to apply ; is to open letters of credit in the government and private banks,” noting that “the Finance Committee has informed that CBI supports all procedures in reducing the rise of the dollar against the Iraqi dinar,” Jubouri said.

The Finance Committee hosted this month, the CBI deputy governor, Abdul Basit Turki and discussed with him the reasons for the high price of the dollar against the Iraqi dinar.

[Sinjar]

CBI prosecutes MP for misleading

Sunday, 02 June 2013

Shafaq News / Central Bank of Iraq (CBI) announced on Sunday, prosecuting a member of the Iraqi parliament on the back ground of “offending” the bank's reputation and “misleading” the public opinion on the banking business.

“One of the MPs said during a television interview that CBI has deposited, a billion dollar with an interest rate of 3% in three Arab banks,” CBI said in a statement received by “Shafaq News”.

“The MP is not well informed on what’s going, as the mechanism adopted at the bank is depositing in central banks only in countries that have more than good rating credit, this decision is performed by the Bank’s administration broad”.

“This misguided talk is used to confront the Bank's policy in getting rid of the corruptors and defending serious bankers in building the economy of Iraq”.

“Confusing the public information does not represent an abuse to the central bank and the banking system only, but also to the system of the national effort to build the institutions, support the economy and weakens confidence in any decisions and mechanisms that can be pursued by the state,” The statement noted.

CBI is a group of specialized committees to combat money laundering, crime funds and the financing of terrorism, Iraqi Anti-Money Laundering Act of 2004 has established supervisory procedures to institutions, particularly banking ones.

[Sinjar]

Microsoft willing to improve banking transactions in Iraq

03-06-2013

Alsumaria News- Microsoft announces its willingness to develop the banking sector in Iraq by using high-end technology in financial transactions.

The size of financial transactions performed in private and public banks were the center of attention of relevant governmental entities. This led the latter to advise banks on the necessity of taking their electronic transactions to a new level with the help of the internationally-known Microsoft who recently expressed its readiness to help improve the banking sector in Iraq.

“We want these institutions to make use of Microsoft’s expertise used in most of the international banks; in the aim of taking the banking sector to a new level. Today we also want to reiterate our wish to use legal licenses from Microsoft”, said Amin Al Sabbagh, Microsoft’s representative, in a statement to Alsumaria.

As for the banks, they considered that this step will help improve the banking system due to the huge amount of monetary transactions that go beyond traditional methods.

“The services provided by banks require safety which is provided by accurate systems. Every banking institution needs such systems including financial establishments since they deal with money transferring and require technical monitoring”, added Manaf Al Badry, head of Private Banks’ Union.

Central Bank of Iraq and Ministry of Finance work alongside banks in Iraq to train engineers on operating and maintaining financial transaction applications especially the ones related to security.