The State of Microfinance in Iraq

This note summarizes the views of delegates gathered at the United States Agency for International Development (USAID) sponsored "Iraq National Microfinance Summit". The note:

• Outlines issues facing microfinance in Iraq today;
• Provides views about the state of Iraqi microfinance;
• Shares experiences and solutions, and charts the way forward.

The note emphasizes that additional investment in microfinance development and expansion is critical since:

• Demand for microfinance services in Iraq is high;
• There is a financing gap;
• There is a need to re-energize business activity through microcredit loans to micro and small business entrepreneurs.

The note lists some the drawbacks faced by MFIs in Iraq:

• The lack of security and banking infrastructure are impeding the development and expansion of the microfinance industry in Iraq;
• Security problems have forced MFIs to close their operations in Mosul and Ba'qubah;
• Offices in Baghdad and Basrah have been severely affected by insurgent activities in those areas;
• An underdeveloped banking infrastructure has also hampered the operations of MFIs;
• MFIs cannot transfer funds between branches and have difficulty getting bank staff to process their clients' loan payments and produce correct monthly bank statements.

The paper finally concludes with the steps ahead for the future:

• Developing a paper to document summit deliberations and provide recommendations for future microfinance engagement in Iraq;
• USAID, IZDIHAR, and the MFI representatives meeting quarterly to discuss implementation issues;
• Continuing dialogue between U.S. officials and Government of Iraq (GOI) officials to raise awareness among the GOI aimed at creating an enabling environment for the provision of microfinance.