State of the Iraqi Microfinance Industry Report 2011

The Iraqi microfinance industry based on standards of international best practices is relatively new to Iraq and the Middle East and North Africa (MENA) region in which the country is located. Established in Iraq in the latter half of 2003, the industry has 12 international and indigenous microfinance institutions (MFIs) operating in all 18 provinces of the country. The industry through the end of 2010 disbursed more than $592.7 million in loans to nearly 230,000 clients since inception. As of the end of 2010, there is an outstanding loan portfolio of more than $106.4 million with 75,182 active clients. The industry continues to enjoy very high rates of loan repayment, notwithstanding ever-present security challenges.

The industry is increasingly using the solidarity group lending (SGL) methodology. There is over $7.2 million outstanding to almost 13,000 individual group members, one-third of whom are women.

MFIs have adopted internationally-compliant reporting standards; developed effective rules and recently instituted an industry-wide Code of Conduct and Ethics. They have also installed more modern management information systems to more effectively track client outreach and financial information and trends. The Central Bank of Iraq (CBI) and the NGO Directorate are increasingly engaged in the regulation and supervision of the industry.

The development of the Iraq microfinance industry is largely attributable to the efforts of the U.S. Agency for International Development (USAID). Over the past six years, USAID, through its implementing partner USAID-Tijara and its predecessor USAID-Izdihar, has been building the industry at the macro, meso and micro level through targeted interventions aimed at integrating microfinance institutions into the formal financial system, capacity building of industry participants, product innovation as well as enhanced transparency and reporting.