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Supporting Microfinance In Iraq

A $2,500 loan from Al-Tadhamun saved Salwa Noori Elyas's dress shop two years ago when it faced a cash flow crisis. Today her business nets $800 a month.

Microfinance a key component in fighting poverty in Iraq.

Microfinance is a key component in fighting poverty in Iraq. Small loans enable citizens to begin or maintain small businesses, called microenterprises. The United States Agency for International Development’s Tijara program provides funding for nine microfinance institutions, serving all of Iraq’s eighteen provinces.

Loans for poor and low-income citizens barely existed when USAID arrived in Baghdad in 2003. Before then, said USAID Deputy Assistant Administrator Chris Crowley in an interview, the banking industry “only financed [a] really large enterprise – the oil sector in Iraq.” As a result, entrepreneurs and owners of small-staffed businesses lacked the necessary resources to get started and flourish.

Due to microfinance loans, hundreds of thousands of jobs have been created in Iraq since 2004. Since that time, $808 million in loans have been distributed with an average of $1,500 each. The number of loans distributed totaled 344,000. In September 2011, USAID reported a 98 percent loan repayment rate.

The microfinance institutions funded by USAID also provide training and technical assistance. The goal is to stimulate private sector growth and create jobs, said Assistant Administrator Crowley:

“This microfinance industry is now spread out all over the country, and it is one link in the financial development that has to take place...if its economy is going to improve overall and jobs are going to be provided at every level.”

However, said Assistant Administrator Crowley, the success of microenterprises positively affects all economic levels:

“The microfinance industry. . .has allowed us to move up to small and medium enterprises as well, improving the banking system at those levels so that somewhat larger loans can be made to larger sized businesses.”

To aid small to medium sized businesses, USAID funds the Iraqi Company for Bank Guarantees, which supplies up to 75 percent loan coverage to private banks for loans varying from $5,000 to $250,000. This will allow Iraqi banks to increase investment in the private sector and improve economic growth.

USAID/Tijara will continue to “work very closely with the banking system in Iraq, both public and private,” Assistant Administrator Crowley said, “in order to increase the availability of funding for both micro and medium-sized enterprise...[The program has] been a substantial success.”