Iraqi Dinar
Would you like to react to this message? Create an account in a few clicks or log in to continue.

Spurring Growth In Iraq’s Banking Industry

Go down

 Spurring Growth In Iraq’s Banking Industry Empty Spurring Growth In Iraq’s Banking Industry

Post  Admin Tue Sep 18, 2012 10:03 am

this is a must read.... I am not going to high-light it!



September 17, 2012



William C. Keliehor aids financial development in Iraq, a country where only 15 per cent of the population has a bank account.

Not many banking veterans can claim to have travelled back in time, but for William C. Keliehor it’s a matter of the future. The former CEO of American Express Middle East has dedicated his 23-year career to designing premium products for the affluent, including 11 years with Citi, where – among other things – he launched Russia’s first credit card. So what is a developed market expert doing in Iraq, a country with a banking sector that is so underdeveloped that a tiny 15 per cent of locals hold a bank account?

“The opportunity to make a difference,” he says grimly as he undertakes the role of an executive banking advisor to the Iraq Financial Development Project, an organisation that works with the Central Bank of Iraq on key local projects and institutions.

A man more accustomed to plush surroundings, like the Al Qasr hotel where the interview takes place, must find the dusty dangerous environs of Iraq rather challenging.

“It is tough,” he admits, elaborating that he has to take security precautions, such as travelling in a convoy, wearing a bullet-proof vest, roaming in armoured vehicles with self-inflating tyres, keeping his family tucked away in Dubai and not revealing his travel plans to anyone. “But,” he adds, “it’s worth it for the work we’re doing.”

Despite the fact that US troops withdrew from Iraq only in December last year, Keliehor claims that he feels no antagonism as an American in Iraq, especially since he adopts a “partnership- oriented approach and deals mostly with Iraqi regulators and vendors who want to build a stable banking system.”

Many may not share this Panglossian viewpoint. In a populace of 31 million, and only 4.5 million bank customers, most Iraqis conduct transactions in cash, and hide their cash under mattresses (yes, mattresses). There are fewer than 100 ATMs in the capital city of Baghdad. The Iraqi economy is in shambles, crippled with widespread corruption, fractured political governance, intermittent bombings and violence. Statistics show that more than half of Iraq’s young urban males are unemployed, with female participation in the workforce even lower at 19 per cent.

Although the government aims to consolidate the current 50 or so banks down to 20 for balance sheet leverage, while also inviting international banks to buy local banks, why would a foreign company enter such a risky environment?

A cynic would say oil. Iraq sits on an estimated 143 billion barrels of proven oil reserves (more than eight per cent of global reserves), according to the World Bank, which recently projected that growing oil exports will boost the country’s gross domestic product by 12 per cent this year, among the fastest rates in the world.

But Keliehor thinks otherwise, “the economic scenario in Iraq is changing fast. After health, water and the economy, banking is the next step forward for Iraqis. Projects like ours are welcome by Iraqis as they are keen on entrepreneurship, on developing their know-how and they love to work.”

The Financial Development Project, where Keliehor works, is designed to assist Iraq in developing infrastructure and capacity of the financial sector to international standards, thus ensuring its long-term growth. By working closely with private sector stakeholders and organisations, including the United Nations and World Bank, the project advocates reforms, expands financial intermediation and provides assistance to government counterparts, such as the Central Bank of Iraq. Its parent company, USAID, has invested over $8 billion on overall reform in Iraq since March 2003, and aims to spend $174 million between 2008-13 in its Provincial Economic Growth Programme.

New Developments
Recently, Iraq Financial Development Project, in association with the Central Bank of Iraq, introduced two changes to the payments system that apparently have the potential to revolutionalise Iraq’s banking sector, while also integrating banks with the financial services sector.

The first change is the introduction of a “national switch” for processing credit card and ATM transactions. This is crucial. Currently every bank operates its own unique system for cards, and since not every point of sale is connected to every system, no one card works everywhere. It’s not a surprise then that almost everything is paid for in cash. The national switch will eliminate this problem by connecting all of Iraq’s ATM machines and credit card point-of-sale scanners to a common platform.

The second change is the establishment of the Iraq Interoperable Mobile Payments System (IIMPS), which allows people who don’t have a bank account to access a bank using their mobile phones. This step is commensurate with a unique feature of Iraq, where mobile phone users form about 80 per cent of the population. This system will permit bank account holders to conduct transactions over a phone call, removing the need to pay for anything with “blocks” of hundred dollar bills, as is the case with the local Iraqi dinar.

Keliehor too sees the future of Iraqi banking as one that moves away from the brick-and-mortar system to a mobile banking one. “Currently there is still a wait-and-watch approach towards Iraq, but by next year the political environment will be clearer, so there will be an evaluation of strategy followed by change. Till then Iraq will have a bottom-up rather than a top- down approach to banking. A slow maturity will take place in the market, starting with the introduction of prepaid cards, then debit cards and finally credit cards.”

The momentum will be slow and skeptical, he admits. “The politics and the demands of people will need to be managed to move things forward faster. But I remain bullish on the opportunity.”

The enormity of erecting a new world always remains, but as Keliehor has learnt over the years: build it and they will come.

http://gulfbusiness.com/2012/09/spurring-growth-in-iraqs-banking-industry/2/

Admin
Admin

Posts : 29357
Join date : 2012-04-30
Location : Arizona

https://iraqidinar.forumotion.com

Back to top Go down

Back to top

- Similar topics

 
Permissions in this forum:
You cannot reply to topics in this forum