Iraqi banking analysis reveals troubling lending ratios
The analysis categorizes Iraqi banks into three distinct groups based on their credit-to-deposit ratios. Large banks, with assets exceeding one trillion Iraqi dinars, maintain a stable ratio of 46%, which is well within international safety standards. However, for medium-sized banks (with assets between 500 billion and one trillion dinars), this ratio jumps to 109%. The most alarming figures come from small banks (with assets below 500 billion dinars), where the ratio soars to an astonishing 400%, meaning their loan portfolios are four times the size of their deposits.
To illustrate this disparity, Al-Obaidi's analysis cites specific examples. One small bank with just 2.2 billion dinars in deposits extended loans valued at 440 billion dinars. Another had deposits of only three billion dinars while managing a credit portfolio exceeding 136 billion dinars. The majority of these loans were sourced from the Central Bank's 13.5 trillion dinar initiative for small and medium-sized enterprises.
This trend is prompting critical questions: How were institutions with such a limited deposit base and questionable creditworthiness enabled to manage these massive sums? What is the nature of the projects being funded, and what is their actual impact on Iraq's economy and GDP? Al-Obaidi's analysis suggests that while the initiative has been in place for over two years, the loan-granting mechanism needs a comprehensive review. He also calls for a re-evaluation of banks based on deposits and client base, as well as more rigorous oversight of the small banks that appear to have found a massive opportunity for financial maneuvering without clear standards or accountability.
The analysis concludes with the central and most pressing question: Who are the real beneficiaries of these loans, and did the initiative truly achieve the economic goals for which it was launched?
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