CBI tells Iraqi Newspaper Al Sabah about Microfinance Role in Targeting the Poor

The CBI Research Director Dr. Hadi Sabah has indicated that the microfinance enterprises provide the economic development strategy and start from the poor Iraqi families as the poor are targeted by new small businesses. He added, on the sidelines of the Inclusive Financial Services Stakeholders Conference 2010 held by USAID-Tijara, that these industries began from scratch, and that the CBI have set easy conditions for loans. "We have achieved since early 2004 numerous successes and activities in the small businesses development sector, and that the CBI considers itself a partner in Tijara's development projects, and the CBI is seeking to maintain the stability of the exchange rate and keep the inflation rates as low as possible in addition to reducing the reserves percentage to 15%." Mr. Sabah elaborated.

The NGO Directorate Director General at the State Ministry for Civil Society Affairs Dr. Ahmed Al-Attar stressed the need for sustainable development in Iraq and highlighted the importance of capacity building and the need for devising new mechanisms for the continuation of the development programs which are being adopted to achieve an economic growth which everyone is seeking. He added most of the organizations interested in economic affairs should be committed to the small enterprises assistance principle, and that mechanisms must be specified to support these projects due to their significance in the local economy.

On his part, Mr. Muhammad Junaid, Director of Microfinance component at USIAD-Tijara said the experience in Iraq has shown this program can bring benefit to the poor through understanding their needs first and this would require involving them in discussions related to designs of appropriate financial services and ways of providing them to the poor as easily as possible. He added that we must explore the conditions the poor need to utilize their potentials, and that the loan size, guarantee options and repayment schedules are among the factors that determine the borrower's eligibility and microfinance success. "With delinquency rate less than 1%, the 12 microfinance institutions have proved to be eligible for lending, and these institutions are referred to as (Banks of the Poor) by the local communities in which these bank are operating, adding that the sustainability issue is key to continually meeting the needs of the poor who can access an increasing number of various financial services which are competitive, demand-driven and of high quality. The microfinance industry in Iraq puts the poor first through providing jobs, saving family enterprises and enabling the struggling entrepreneurs to build solid financial bases for their businesses" Mr. Junaid elaborated.

He then added that the poor rarely have collateral or connections necessary to get bank financing. Therefore, MFIs started to offer group loans or solidarity group financing to sellers at the market or neighborhood. By the end of this year, the number of borrowers totaled 25,500 receiving loans of total value of $ 24 million (ID 28 billion) in order to open start up businesses or expand their existing projects although they were not eligible for loans in the past.

As regards agricultural loans, and since the agricultural businesses are not expected to succeed, it is hard for the farmers to get loans. Those farmers became a focus of attention for microfinance institutions.

Until now, more than 2300 farmers obtained micro loans to improve their lands and diversify the crops produced. These loans breathed new life into some provinces like Ninawa. Farmers became able again to take out loans up to $ 5000 or ID 5.8 million provided that repayment is made after harvest.

He explained that as microfinance in Iraq becomes more mature industry, this conference has addressed the key regulatory issues affecting the development of industry and transformation of MFIs into an official credit sector under the supervision of CBI.