Paper

State of Iraq's Microfinance Industry

Reviewing the state of Iraqi microfinance
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This report reviews the current state of Iraq's microfinance industry. It also attempts to gain an understanding of future trends which are likely to impact its growth.

MFIs in Iraq have emerged as effective, demand driven financial intermediaries offering an alternative to inaccessible formal financial institutions and exploitative money lenders. They have achieved significant scale, depth of outreach to the poor and women, financial and institutional sustainability, and consequent socio-economic impacts, with early stage donor funding from USAID. The sector includes 12 NGO-MFIs operating in 18 provinces. Findings include:

  • Overall regulatory environment has improved since 2009 with the issuance of the new NGO Law;
  • Central Bank of Iraq has recognized microfinance as an effective means of financial intermediation for micro, small and medium scale enterprises (MSMEs);
  • Microfinance sector has disbursed 257,209 loans, valued at over $592.7 million as of end of 2010;
  • USAID, through its implementing partner, USAID-Tijara, has scaled-up initiatives at the macro, meso and micro levels to create an inclusive financial sector in Iraq.

Future trends for MFIs will include increased focus on clients and partnerships. Donors and government will increase focus on the Iraqi microfinance sector as a strategic partner within the MSME development strategy.