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Hoarded money and stimulating depositors
Economical 11/01/2023
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Metwally
Official estimates indicate that 85 percent of the issued monetary mass, amounting to more than 100 trillion dinars, is outside the banking system and is called money hoarded outside banks.
This means that this huge amount of monetary mass is disabled from performing its role in development, and since the banks are the driving tool for the wheel of development through their credit (lending) policies, they are unable to perform this role for this reason. Therefore, you find our economy unable to advance due to the decline in the development performance of the banks. .
Meanwhile, monetary policy is moving towards motivating the depositor public to deal with banks. The Central Bank’s latest circular last week urged banks to facilitate procedures and create incentives at attractive interest rates for the purpose of attracting depositors.
What is the challenge facing this trend?
The trust factor is the most difficult number and the basic indicator for the success of the process of attracting the public’s hoarded funds to deposit them in banks.
Banks in all countries of the developed world are the primary engine of the economy through their role in implementing development through their lending policies that contribute to generating interest that accrues to depositors and bank owners with lucrative profits by investing money and making profits. They also contribute to the implementation of projects and thus contribute to the circulation of funds.
But the problem with Iraqi banks, in all frankness and transparency, is that they suffer from a loss of public confidence, which is a deep-rooted, inherited problem due to the actions of some banks due to the weakness of their management and the alienation of depositors from them.
How do we restore confidence in light of the new trend?
The public is looking for a guarantee (an insurance policy) in order to be encouraged to deposit their hoards, and this requires facilitating deposits and withdrawals in an easy way without tedious routine complications. However, the poor banking behavior of some employees and the complexities of police-style instructions contribute to the public’s reluctance.
(Insurance policy) means the body that officially guarantees the public’s deposits in the event of the collapse of a particular bank, and here comes the role of the Deposit Insurance Company, which was recently established for this purpose.
Here I have an assessment of the Deposit Insurance Company, with all transparency and clarity, that its performance is weak, inactive, and unknown, and it requires the formation of a regular and influential media unit to market its activity on an ongoing basis, and for the company to take the initiative to give guarantees to depositors by guaranteeing their money with a signed official paper distributed among all depositors in any bank, in light of which it bears responsibility. Legal information about deposit insurance, otherwise why was it established?
Thus, it can provide partial security that encourages the public to deposit in banks and gradually restore confidence.
The fluctuation of the dollar exchange rate cannot be overlooked in creating chaos and mistrust.
But we are talking about the national currency, which is still strong, and there is no problem in depositing and withdrawing it with the company’s guarantee.
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