The Central Bank of Iraq announced today, Monday, the size of lending amounts within its project initiatives, while revealing the presence of more than 70 trillion dinars outside the banking system for trading.The Governor of the Central Bank of Iraq, Ali Al-Alaq, said in a speech at the conference to activate lending programs in Iraq: “We thank the Association of Banks and the United States Agency for Development for keeping pace with the banking sector and attempts to promote it and push it with grants that achieve the desired goals for the Iraqi economy.”Al-Alaq added that “bank lending represents the main pillar in the work of the banking sector, whether with regard to its revenues, profits and operation or with regard to economic activities in various forms.”He pointed out that “the Central Bank was a pioneer in stimulating the lending capabilities of the banking sector, as in 2015, we launched an initiative that is perhaps the largest in the history of Iraq, which was to allocate 5 trillion dinars to industrial, agricultural and housing projects, as well as one trillion dinars to small and medium enterprises,” noting that “this initiative was able to stimulate the Iraqi economy significantly, whether at the level of some projects or in solving the housing problem by providing lending to the housing sector.”He pointed out that “the amounts that have been lent so far amounted to about 13 trillion dinars, which is a very large amount,” adding: “We are now in the process of evaluating these initiatives, taking advantage of lessons, putting them in the right directions and focusing them in specific goals.”“There will be a great focus in the next phase on financing small and medium enterprises, as well as with regard to renewable energy projects or loans in trying to contribute the central bank to meeting the challenges of climate and the field of clean energy,” he continued.He stressed, “The motivation of the banking sector towards its ability to lend policies should not depend on the central bank, because this role of the central bank is an exceptional role dictated by some circumstances, but the first and the basis is that the banking sector is able to take over and provide lending possibilities by bringing deposits and through its own financial capacity.”“We will soon work on a national lending strategy, and the paper was presented last month when I was outside the central bank, but aware of the importance of bank lending, I presented a paper at a conference at Al-Mustansiriya University on building rules for lending policies or a national lending strategy,” Al-Alaq continued.He pointed out that “these issues are very important and national because the issue of lending is not only related to the financial capabilities of banks, but also to the work environment and its regulatory and legal conditions and many factors that fall outside the banking system, so the joint strategy will be presented to the government and other parties to be the issue of their participation in supporting this plan to provide the necessary decisions and procedures to make it successful.”He pointed out that “some of the signals that we must focus on in the next stage were highlighted, which is that the ability of banks to lend depends on their capabilities in bringing deposits and this is the role of the banking sector to balance deposits and lending,” explaining that “indicators and data indicate that the banking sector has reached the highest lending ceiling because the percentage set according to the instructions of the Central Bank is 70% of deposits, and the banking sector has almost reached this percentage, which requires that there be great efforts to attract deposits to the banking sector.”“Many talk about the limitations of bank lending, so as not to blame the banking sector only because these are the capabilities at its disposal, which requires that there be a broad comprehensive plan to attract deposits so that the banking sector can mobilize them towards granting loans,” he added.He continued his speech: “We have more than 70 trillion dinars outside the trading banking system and this is a very large amount and represents a high percentage of GDP, so it is necessary to focus in the next stage on finding the necessary means to activate the deposit movement through several procedures in this regard, after we have completed the development of a comprehensive plan and a wide electronic payment strategy to expand the link between these funds that fall outside the banking system and their uses, which can be large and wide if these funds are attracted to the banking sector.”The Governor of the Central Bank called on the banking sector to “be an essential partner with the Central Bank in its provision of electronic payment methods at a wide national level,” adding: “Also, one of the matters that fall on the banking system in this regard and direction is to reconsider banking services quantitatively and qualitatively, because banking services have come a long way despite the short life of some banks, but some have reached advanced stages and others still need to improve the level of banking services in different types and in the method of submission.”He pointed out that “one of the striking things is that the survey conducted by the Arab Fund in studying the public’s reluctance to deal in the banking sector. Contrary to expectations, the first reason was that the services are complex and not conveniently available to the citizen in the banking sector, and this is a fact that exists and needs to mobilize the banking system in lending the citizen and providing the necessary services with the best methods and techniques. Unfortunately, he noticed that the citizen in some branches of banks is reviewing a complex administrative department or a court in the way he deposits or withdraws to amounts.”He pointed out that “the Central Bank issued a wide support to the banking sector in this field, and it will be the focus of our attention and monitoring on the ground for banking services and the extent to which they keep pace with the standards and achieve the goals we referred to.”He continued: “The issues that we call for to reduce the risk of borrowing due to high rates is the default in debt, and we will submit the project to establish a loan guarantee company, and this is very important and provide a great deal and flexibility for the banking sector to provide loans.”He stressed that “the banking sector needs more geographical spread,” adding: “We commend some banks that have extended to wide networks inside Iraq and call on other banks to promote this spread in the regions of the country.”He warned that “in order to reduce risks with regard to lending and in order for there to be a balance in sectoral growth, it is necessary to diversify the credit portfolio or loans, and this constitutes a security for the banking system and a balance in sectoral growth, and we note that there is a discrepancy in this area and this requires consideration, and the best evidence of that collapse suffered by Silicon Bank Ghali, because of the very clear is the credit concentration in a particular sector, and this was the main reason for the collapse of the bank.”He stressed that “sectors in Iraq need to be stimulated, grow and constructive, so focusing on a specific sector should not be the goal and the end result of bank loans, as happened now, we note there is a focus on the real estate sector and housing, which is important, but in return we note lending related to the agricultural, industrial and services sector is still at its lowest levels.”He concluded by saying: “We need to build the national strategy for bank lending, led by the Central Bank and presented to the private banking sector to give observations and opinions, and then start working on it to achieve the goals mentioned.”
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