Homegrown Fintech Boosts Iraqi Economy

The last year has seen a dramatic surge in the use of Fintech (Financial Technology) across the Iraqi economy. Both the government and private businesses have begun to implement it into everyday life, in everything from welfare to insurance. The mostly state-owned Iraqi banking system was hit hard by the 2003 invasion and subsequent instability, with many people relying on personal stashes of wealth. In the World Bank’s 2017 Global Findex Database, it was estimated that less than 25% of adult Iraqi’s held a bank account, and payments of any sort were done in person. Recognising this, and the rapid technological advancements being made in the Fintech sector, the Iraqi government, banks, businesses and investors have seized the opportunity and begun a widespread introduction of technology into the Iraqi economy.

Fintech is generally held to be the next evolution in financial services, whether through independent startups seeking to overthrow established financial centres, or older companies modernising to keep their share of the business. In Iraq, however, what fintech can offer is a way of allowing people to live ordinary lives even in the face of political instability. The most prominent Iraqi government Fintech project, International SmartCard is a prime example of this. Owned both by a pair of state banks, and private investors, they pay public sector salaries and pensions directly into the new bank accounts of over 7 million Iraqis, and through working with Mastercard, have enabled many Iraqis to use debit cards both at home and abroad for the first time ever. ISC is particularly beneficial to the state pension scheme, where previously recipients could only pick up their money from state-owned banks on a scheduled day once every two months, with no guarantee of the bank even being open. Now, payments are given directly every month to an ISC account.

While Fintech in Western countries is viewed as being vulnerable due to its online-only nature, this is seen as a benefit in Iraq, by reducing reliance on vast paper trails, and biometric identity keys with each ISC card have helped cut down corruption in the pension system. The development of these keys, in particular facial recognition, has had a significant impact outside of the state economy. Private banks have similarly taken advantage of Fintech developments to become better connected. In just one example, Al Mustashar Islamic Bank has adopted the ‘ICS Banks Islamic’ system developed by ICSFS. Fully implemented within three months of its launch, the system is an integrated suite that allows all banking functions to be governed centrally, without masses of paper records to get lost in, and is fully Shariah-compliant, allowing an essential part of the banking system in Iraq to keep pace with the rest. Similarly, insurance company Al Maseer Insurance has adopted the use of Virtual I to take complete surveys of properties in areas with high security risks, allowing them to operate on a national scale other companies can’t match.

Ultimately, what this wholehearted usage of Fintech means for Iraq is very positive. Under the government’s Iraq Vison 2030, Iraq seeks to be a “a model for the state of economic and social welfare institutions,” and the growth of Fintech in the country is a significant part of this. Iraqi GDP is set to grow by 8% in 2019, and both an increased diversification and digitalisation of the economy are at the root of this. Fintech, whether in making business easier to conduct or helping provide a more stable financial base for the Iraqi population is key to this transformation, and the future path looks bright for Iraq to continue making use of technology in making business easier and lives better.