New lending strategy
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In the middle of the current year 2023, the Central Bank of Iraq announced, through its governor, Ali Al-Alaq, the Central
Bank’s intention to launch a lending strategy at the beginning of the year 2024. It seems that the Central Bank sensed the actual need to correct the path of lending in Iraq, which was marred by some shortcomings that led to a move away from the goals that it set. Loans were distributed to achieve them, and they are certainly development goals that serve the country's economy by stimulating its economic sectors.
It cannot be denied that some of these loans have paid off, especially in the service aspects with goals related to the housing crisis, but they have also been diverted from this goal by applications by borrowers, companies or individuals.
Here I am talking about the total loans that were distributed not by the initiatives of the Central Bank, but by the government banking sector, which justified the mistakes with the aim of improving the individual’s standard of living, forgetting the most important goal of addressing a real housing problem.
The statistics for the actual need for housing units determined by the Ministry of Planning are approximately three million housing units. Loans were issued at the time in various forms, including lending to build a private housing unit and to complete or expand the building. However, most of these loans were wasted due to consumer and luxury aspects and did not address the real crisis.
It is true that giant investment projects were implemented here and there with the highest specifications, and they are also required to reflect the solid economic reality of the country. However, they did not contribute to solving the intractable housing problem or crisis. Rather, they went to those with high incomes. Although this is not a curse or defect, the development goal needs to address the real housing of the classes. Medium and fragile, which unfortunately did not happen.
Our vision is that the Central Bank’s 2024 strategy includes the requirements for achieving development goals by revitalizing the productive and service sectors related to the infrastructure of the country that suffers from the deterioration of its infrastructure, and according to urban design and planning that targets the location and the actual need for strategic projects that contribute to raising their contribution to the gross domestic product and not relying on a revenue index. Oil only.
The new lending strategy of the Central Bank, whose steps and broad lines we are waiting to learn, I firmly believe that it will contribute to achieving two important goals, the first of which is achieving real economic development on the one hand and revitalizing the Iraqi banking sector and engaging it in creating banking products that serve the real development goal and restore its pure banking activity without relying on a product. One and I mean the currency window.
Given the possibility that our banking sector can play this role, the step taken by the Central Bank in raising banks’ capital is part of helping them play the next developmental role.
We hope that our banks will be aware of the magnitude of the upcoming responsibility and the necessity of dealing with the Central Bank’s procedures wisely at all costs, even if the merger is accompanied by banking governance that nullifies the fears and suspicions of some that the merger will make them lose the responsibility of disposing of their money. However, the benefit will be more general and comprehensive if we are able to achieve a culture of merger based on governance. Banking in bank management.
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