While Iraq wrestles with a pickup in brutal violence again, the country’s bankers continue to painstakingly modernize and build a banking sector that is crucial to the country’s economic resurgence.
Take National Bank of Iraq, for example: this Baghdad-listed lender with eight branches is introducing internet and mobile banking this year as well as installing 20 ATMs, a major step for a bank that operates in a predominantly cash-based economy with outdated technology.
“We’re coming from traditional, manual banking: this is a revolution,” said the bank’s vice-chairman Ayman Abu-Dhaim on the sidelines of a two-day business event promoting finance in Iraq.
National Bank of Iraq is one of nearly 40 lenders operating in the country that holds the fifth-largest known oil reserves in the world. It competes with other local, many family-owned, banks and a growing number of more savvy financial groups from abroad such as Standard Chartered and Citigroup.
Sami al-Araji, chairman of Iraq’s National Investment Commission, told the conference about the nationwide investment plan to the tune of $357 billion aimed at jumpstarting its economy. He also spoke of the country’s $1 trillion spending needs to rebuild and upgrade its infrastructure. The lion’s share of the funding for those investments will have to come from Iraq’s oil and gas revenues.
In addition, Iraq’s gross domestic product could grow at an average of 7% between now and 2024, effectively tripling the size of the economy, according to Bank of America Merrill Lynch estimates.
So for banks that can stomach the security and the inherent volatility issues, Iraq indeed looks like the place to be.
But the challenges remain immense as the banking sector lags in terms of regulation and technology while also lacking sufficient human resources, bankers said.
“It is surprising that in this day and age some of the international companies we talk to are saying they need to carry with them hundreds of thousands of dollars…to make their basic transactions work. This is clearly not a sustainable model. A cash economy is an old economy, a cash economy doesn’t work efficiently and is insecure,” said Gavin Wishart, chief executive of Standard Chartered in Iraq.