More than $224 million has been injected into Iraq’s private sector economy in the form of Small & Medium Enterprise bank loans thanks to a cooperative effort between the USAID-Tijara Provincial Economic Growth Program and 12 private commercial banks. Of this amount, around $113 million presently is in circulation helping business owners expand their companies and create new jobs.
Prior to 2008, there was little SME bank lending in Iraq. As recently as December 2008, USAID-Tijara partner banks reported only $5 million worth of disbursements with $3 million of that sum outstanding.
Today, USAID-Tijara private partner banks have $113 million worth of SME loans circulating throughout Iraq. Nationwide, that total climbs to $650 million when total bank SME loans unreported to USAID-Tijara are added. This increase in SME lending shows that Iraqi banks regard small and medium-sized businesses as good customers and vital community assets.
SME loans are a recognized driver of job growth. According to bank records, borrowers receiving SME loans hired 21,000 new employees when they expanded their businesses.
Four years ago, many SME loans were guaranteed or subsidized by non-banking financial institutions such as the Iraqi Company for Bank Guarantees and the Iraqi Company for Financing SMEs. Today, over 56% of the SME loans made by USAID-Tijara’s partner bank were made with the banks’ own money.
One indication that SME loans are becoming a permanent part of Iraq’s commercial financing is the fact that 63% of the disbursed SME loans reported to USAID-Tijara have been made over the past 20 months. Indeed, of the 12,535 SME bank loans reported over the past four and a half years, two out of three, or 67%, are currently outstanding.
The accelerating rate of SME lending by Iraq’s private commercial banking sector is a major contributor to the economic revitalization in Iraq, says Adnan Chalabi, Director General of the Bank of Baghdad and chairman of the Iraqi Private Banks League. “Growth outside of the oil sector depends squarely on growing business at all levels,” he notes. “Small and medium enterprise financing is a dynamic force that directly improves Iraq’s economic well being.”
