Currently, five microfinance institutions (MFIs) operate in Iraq with the support of USAID and the U.S. military. These MFIs have over 16,500 active clients with a combined outstanding loan portfolio exceeding $18.5 million. These loans are managed through 25 offices in 15 provinces with six new offices to be opened by early 2007.
But the lack of security and banking infrastructure are impeding the development and expansion of the microfinance industry in Iraq. Security is an overriding factor in all aspects of MFI operations. Although implementation of microfinance programs in post-conflict countries such as Sudan, Afghanistan, and Bosnia has generally been successful, there are no real global precedents to draw on for guidance in rolling out successful programs during a war. Security problems have forced MFIs to close their operations in Mosul and Ba’qubah, while offices in Baghdad and Basrah have been severely affected by insurgent activities in those areas.
An underdeveloped banking infrastructure has also hampered the operations of MFIs. The largest MFI uses the state-owned Rafidain Bank to manage the funds for its current $12 million loan portfolio. MFIs cannot transfer funds between branches and have difficulty getting bank staff to process their clients’ loan payments and produce correct monthly bank statements.
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