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Experts urge use of 'dormant funds' in construction and investment
Economic 07/28/2024
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Baghdad: Haider Falih Al-Rubaie
Economic experts stressed the need for government and private banks to adopt methods that would absorb the idle and hoarded cash mass of citizens, stressing that this process would stimulate many sectors that depend on financial investments, while they suggested raising the interest rate granted to citizens in order to attract this money, which is estimated at about 85% of the issued currency.
According to financial experts, the "banking temptation" policy represents a basic element of attraction for the hoarded money of citizens, stressing the need for banks to adopt methods that would create a state of trust with depositors, and reassure them of the possibility of withdrawing part or all of the amount when they need it and in a smooth manner.
The Prime Minister's Financial Advisor, Dr. Mazhar Mohammed Saleh, suggested two quick ways to benefit from the public's cash surplus, especially for the purposes of development funds. The first is to deal with borrowing bonds, which are issued by the Central Bank or the government. They are tradable, can be bought and sold, and can extinguish debts and bear annual interest, including the issuance of Islamic bonds as a hybrid financial instrument. The second way is to spread borrowing and depositing through mobile phone banks within the broad uses of electronic banking.
Saleh stressed the need for banks to seek to reverse the hoarding equation represented by the public retaining about 85% of the issued currency, which still constitutes hoarded balances outside the banking system and are considered dormant, ineffective balances, and do not provide any important service to the national economy, and that some of them operate with very high usurious borrowing risks?
In order to exploit the cash mass hoarded by citizens, financial and banking expert, Abdul Rahman Al-Shaikhli, during his interview with "Al-Sabah", believes that the government and private banking system must exert more efforts to exploit this wealth, indicating that "there is more than one way to absorb the cash mass hoarded outside the banking channels, the first of which is to work diligently to restore confidence between the citizen and the banking institution and create a state of reassurance among the depositor that he is able to recover his money partially or completely when he needs it smoothly, which makes him convinced to invest it in bank credits that achieve
guaranteed profits.
Al-Shaikhli also stressed the importance of "increasing interest on deposits and diversifying them, as a type of enticement method with the aim of absorbing the hoarded money, and that it be granted to him monthly or quarterly and not necessarily annually as is the custom for fixed deposits, indicating that this step can entice the depositor to leave his money invested within the banking channels that achieve a fixed and stable return."
The expert Al-Shaikhli stressed the importance of cooperation between government and private banks to issue guaranteed treasury bonds (that can be traded in the stock market) with attractive interest rates that contribute to investing the citizens' accumulated funds in major projects that the government contributes to completing and supervising and monitoring their implementation without exploiting them for corruption, thus enhancing his patriotism.
In line with the calls of experts and specialists, the Ministry of Finance announced the launch of a new issue of government (Injaz) bonds (second issue) for public subscription, worth (1.5) trillion and five hundred billion Iraqi dinars.
In turn, the expert and specialist in international economics, Dr. Nawar Al-Saadi, pointed out during his interview with "Al-Sabah" that "the most prominent challenges facing the absorption of the hoarded cash mass of citizens is the lack of confidence of citizens in the banking system, and this problem hinders efforts to absorb the hoarded cash mass."
The expert Al-Saadi believes that in order to enhance confidence in the banking system, transparency and governance in the financial sector must be improved, and political reforms must be implemented to enhance public confidence in the government and institutions, stressing that "one of the main ways to absorb liquidity from citizens is to raise the interest rate, and then the attractiveness of saving in banks will increase, which will prompt citizens to deposit their money instead of hoarding it," explaining that despite the positives of raising the interest rate, this should be done with caution, as it may negatively affect investment and economic growth.
In addition, the government and banks can issue financial instruments such as bonds or savings certificates that provide attractive returns for investors. These instruments can be attractive to citizens who prefer stable and secure returns.
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