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The Iraqi Company for Bank Guarantees Receives First Tranche of USAID Grant Funds

17 September 2007 - At the semi-annual General Assembly of the Iraqi Company for Bank Guarantees (ICBG) meeting held on August 4th in Amman, the Chairman of the ICBG Board of Directors announced attainment of a signficant milestone in the life of the young organization.  He informed the audience that, since ICBG had satisfied all conditions precedent to the disbursement of grant funds by the United States Agency for International Development (USAID), on August 2nd the first $500,000 tranche of a $5 million grant awarded by USAID was transferred to the ICBG’s deposit account at Citibank N.A. in Amman. 

“I thank the USAID Mission in Iraq for its support to the ICBG, and I urge all shareholder banks to promote bank lending activities to small and medium size enterprises in Iraq. Such increased access to finance will certainly contribute to the development of sustainable economic growth for the private sector and help generate employment opportunities throughout Iraq”, said the ICBG Chairman.

The Iraqi Company for Bank Guarantees, Ltd. was established by 11 Iraqi private banks with the help and assistance of the USAID-funded IZDIHAR project. The objective of the ICBG is to assist Iraqi small and medium size enterprises (SMEs) gain increased access to bank loans. It provides partial guarantees of both principal and interest for loans made to SMEs by privately owned banks operating in Iraq.

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ICBG Promotes Financial Transparency within Iraqi Banking Community

29 August 2007 - The Iraqi Company for Bank Guarantees (ICBG) set an example of transparency to its shareholders by preparing its interim financial statements to June 30th 2007 in accordance with the International Accounting Standards.

The financial statements were prepared by the Iraq-cooperating firm of PricewaterhouseCoopers (PwC) “F.H. Al-Salman & Company”, Public Accountants and Auditors and presented to the Semi-Annual General Assembly of Shareholders that took place in Amman in early August.

This represents a “first-time ever” in Iraq and the example has been recognized as such by the banking community.  A number of the more progressive Iraqi banks embraced the report and requested the ICBG to assist them in meeting the challenges of preparing financial statements that comply with the international accounting and financial reporting standards. 

Continuing its policy of transparency, the Iraqi Company for Bank Guarantees will be issuing semi-annual financial reports in accordance with best international accounting and auditing practices.

The Iraqi Company for Bank Guarantees Ltd was established by 11 Iraqi private banks with the help and assistance of the USAID-funded IZDIHAR project to assist Iraqi small and medium size enterprises gain increased access to bank loans.  It became operational in November 2006.  By early August 2007 it had issued 18 guarantees worth $358,361, which support approved loans totaling $482,816.

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The Business Community in Sulaymania Welcomes the ICBG Loan Guarantee Program

24 June 2007 - Over 100 business people and government representatives from Sulaymania received with great interest the information session organized / hosted by the Board of the Iraqi Company for Bank Guarantees (ICBG) on June 11th at the Sulaymania Palace Hotel.  The participants welcomed the increased access to funding and the development opportunities that local businesses will enjoy through expansion of the ICBG activities in the Kurdistan Region.  ICBG was established by 11 Iraqi private banks with technical assistance from the USAID-funded IZDIHAR project. 

The Chairman of the ICBG, who is also the Chairman of Ashur International Bank, delivered a presentation on the ownership, objectives, operational achievements and projected activities of the ICBG to support the provision of increased access to bank loans for small and medium enterprises (SMEs) throughout all of Iraq.  The presentation included details on the ICBG loan guarantee program, a breakdown of the guarantees approved to date, by economic sectors and governorates, and future training programs for the ICBG participating banks. So far, the ICBG approved 20 guarantees covering loans that amount to over $400,000.

The audience that packed the conference room consisted of representatives of the Kurdistan Ministry of Finance, the Kurdistan branch of the Central Bank of Iraq, members of the Chamber of Commerce and Industry, management and staff from the private banks operating in Sulaymania, the Office of the Registrar of Companies in Kurdistan, various Trade and Industry Associations, management from microfinance Institutions operating throughout Iraq and other private sector representatives.

“It is very encouraging that ICBG guarantees up to 75% of the loans and focuses on the cash flow rather than collaterals. This facility will help us develop our businesses”, said one of the businessmen from Sulaymania. “We are very pleased to have the ICBG representatives here informing us about the opportunities that this initiative brings about for small and medium size enterprises”, said the Deputy Chairman of the Sulaymania Chamber of Commerce. The Chamber and the Ministry of Finance of the Kurdistan Region both participated in the preparation of the information session.

“Over the past two years, the USAID-funded IZDIHAR project has supported Iraqi banks in developing modern lending methodologies and sound banking practices through its activities”, said IZDIHAR’s Chief of Party. “This information session illustrates our commitment to promoting cash flow-based lending and to boosting access to funding for small and medium size enterprises.”

For more information on the activities of the Iraqi Company for Bank Guarantees please visit www.icbg-iq.com.

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USAID-sponsored Conference in Amman Focuses on Future of Iraqi Banking Industry

5 April 2007 – Iraqi banking industry leaders and international banking experts gathered in Amman, Jordan April 4-5 for the first Iraqi Banking and Finance Conference, Banking in Iraq: The 21st Century Challenge.

Over 200 delegates attended the two-day conference, organized by the United States Agency for International Development (USAID) through its IZDIHAR Private Sector Growth and Employment Generation and Economic Governance II projects.

Conference participants included representatives from the Central Bank of Iraq, Government of Iraq agencies, regulators, Iraq private and state owned banks, regional and international banking groups, non-bank financial institutions, bank training and certification organizations, banking experts and international donors.

In his opening remarks, USAID/Iraq Deputy Mission Director Mike Harvey affirmed, “Support to the banking sector is a specific priority for USAID and this conference demonstrates our commitment to this important foundation of the Iraqi economy.” 

Mr. Harvey also mentioned that USAID is proud to be associated with the Iraqi Company for Bank Guarantees, which is already achieving its objectives of providing cash-flow based loan guarantees to small and medium enterprises in Iraq.

Daniel Weygandt, Economic Minister-Counselor at the U.S. Embassy in Baghdad, remarked:  ”This event is the first time that Iraqi public and private sector representatives along with regional and international partners have come together to discuss the current status and challenges facing the development of the financial services industry in Iraq.”

During the plenary sessions participants took stock of global and regional banking developments and their implications for the Iraqi banking industry post April 2003.  Topics discussed include:

• Iraqi monetary policy;
• Regulation and supervision of the banking industry;
• Rehabilitation of the state owned banks;
• Development of the private banking sector, introducing new banking products and services;
• Improvements to the payments, check processing and clearing systems;
• Development of a bankers association, banker training and certification organization; and
• The need for banks to adopt international financial reporting standards.

Deliberations from the plenary sessions will be compiled in a recommendations paper for distribution to policy makers, regulators, donors, conference partners and interested parties.

“This Iraq Banking and Finance Conference was the starting point for all stakeholders as they move towards building a banking industry in Iraq that is well positioned for the challenges of the 21st Century,” commented Baljit Vohra, Chief of Party of the USAID-funded IZDIHAR project, at the conclusion of the conference.

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USAID and Iraqi Company for Bank Guarantees Sign $5 Million Grant Agreement

12 March 2007 - In February, USAID and the Iraqi Company for Bank Guarantees (ICBG) signed a grant agreement under which USAID will provide $5 million (USD) to the ICBG to supplement its loan-guarantee fund.  The agreement was formalized at ICBG's second General Assembly meeting of shareholders.  USAID's IZDIHAR program provides technical assistance to the ICGB and to Iraqi private banks.

Incorporated in March 2006 with operations beginning in November 2006, the ICBG guarantees loans - ranging from $5,000 to $250,000 - issued by its member banks to small- and medium-sized enterprises (SMEs) in sectors such as manufacturing, services and trade.  With the recent addition of Emerald Bank in Erbil, the ICBG has expanded to 12 members.  To date, the company has approved 10 guarantees, totaling $187,000.

According to Christian Hougen, Director of the Economic Growth office at USAID/Iraq, “The SME sector in Iraq has historically been deprived of access to formal sources of credit due to the prohibitive levels of collateralization required. The grant provides them with an opportunity to develop and grow.”

In addition to signing the supplemental grant agreement, the ICBG elected a new Board of Directors through a transparent nomination and closed balloting process.  The Board represents management from five of the leading private banks.

“The ICBG's fair and transparent election process reflects the corporate governance procedures that it has adopted pursuant to international best practices," said IZDIHAR's Chief of Party, Baljit Vohra.  

The outgoing Chairman reported to the Assembly on the significant achievements of the ICBG during the first year of operations. These include:

• Participating bank agreements with eleven Iraqi private banks.
• A bank officer training program, designed and implemented in conjunction with IZDIHAR, which has trained 400 Iraqi bank officers to date.
• The development of operational capabilities, systems and policy manuals to ensure the proper functioning of the institution.
• A Memorandum of Understanding with the Jordanian Loan Guarantee Corporation (JLGC) for mutual cooperation and agreement at an operational level on marketing, technological and training activities. To date, 24 Iraqi participating bank officers have attended on-the-job training JLGC offices.
• An MOU with distributors of agricultural equipment, generators and light commercial vehicles to assist SME operators in obtaining financing for up to five years through the ICBG participating bank network.

“We are proud of the achievements of our company, which has been operating under very challenging circumstances," said the newly elected Chairman of the ICBG.  "The pipeline of loan guarantee applications is significant and will help us exceed our business plan projections. We expect to expand our outreach, as another four banks stand ready to sign the participating bank agreement."

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Iraqi Delegation Prepares for the Opening of Formal World Trade Organization Accession Talks

8 March 2007 - Seventeen members of Iraq’s National Committee and WTO Unit, which coordinate the country’s WTO accession effort at the inter-ministerial level, prepared for the opening of the World Trade Organization (WTO) accession negotiations and the convening of the first WTO Working Party meeting in Geneva in a four-day workshop organized in February by the USAID IZDIHAR project.

Two WTO experts were brought in to assist in the training activity, which culminated in a full-scale simulation of the Working Party (WP) meeting. Workshop participants included the core negotiating team which will travel to Geneva to conduct the meeting.

The workshop began with a detailed walk-through of the Working Party process, covering such issues as the protocol to be followed, opening statements, advice on the composition of Iraq’s delegation, appointing Iraq’s spokesman for the WP meeting, procedures, timelines and tactics. The discussion moved on to the substance and issues likely to be raised in the first meeting.

These preparations led to the central event of the workshop – a full-scale, mock Working Party meeting, designed to approximate as closely as possible the procedures, content and duration of a real meeting. The simulation included a Chairman conducting the WP proceedings, and each IZDIHAR adviser taking on the role of key WTO members, including the US and the EU.

Questions and comments for the Iraqi delegation had been prepared in advance covering all aspects of Iraq’s trade and legal regime, such as intellectual property, customs, agriculture, technical barriers to trade, privatization, and constitutional make-up. The delegation was subjected to six hours of intensive questioning. The workshop ended with an interactive evaluation of the mock WP session. Strengths, weaknesses and tactics were discussed, drawing upon the experiences from the session.

While certain weaknesses were identified, there was broad agreement that the Iraqi delegation will be able to successfully conduct the first WP meeting. Dr. Tamam Al-Ghul, former Jordanian Minister for social development, who previously led Jordan’s WTO accession efforts for five years, stated that she was truly impressed at the performance of the Iraqi delegation. Mr. Paolo Vergano, a Senior WTO Lawyer from Brussels who has assisted in numerous WTO accessions, noted that in his view the Iraqi team performed better than other WTO accession delegations at a comparable stage.

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USAID IZDIHAR Project Helps Banks Modernize Lending Techniques

8 February  2007 - The introduction of credit officers in two Iraqi banks is strengthening customer relationships and streamlining loan processing for greater profitability.

Following technical assistance and training from the USAID IZDIHAR project, two Iraqi banks have introduced changes to establish more dynamic relationships with clients.

The banks recently created ‘credit officer’ positions that combine a set of professional responsibilities previously divided among several departments.  The creation of these new positions represents a major shift in the relationship between bankers and their clients. Individual credit officers will be responsible for building loan portfolios, analyzing credit risks, recommending credit extensions, overseeing repayments, and serving as the borrower’s ‘relationship officer' for the lifetime of the loan.

This is a crucial step in moving towards cash-flow based lending. Through a number of courses and direct professional assistance, IZDIHAR has equipped credit officers with the tools required to discharge their new functions.

Both banks are founding shareholders and members of the Iraqi Company for Bank Guarantees (ICBG). Established with technical support from IZDIHAR, ICBG is a new institution created and owned by 11 Iraqi banks to facilitate access to funding for small and medium-sized local businesses and to support the development of a modern cash-flow-based small and medium-enterprise (SME) lending industry in Iraq.

The introduction of credit officers helps improve customer service by streamlining customer relationship responsibilities and by facilitating the smooth processing of the loan guarantee applications.

In addition, the move takes direct aim at a second goal of the ICBG – enhancing bank profitability – by focusing credit officers on building sound, profitable SME loan portfolios.

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Credit Analysis Training Builds SME Lending Capacity of Iraqi Banks

21 January 2007The USAID-funded IZDIHAR project has increased the capacity of nine private banks by training nineteen bank officers in Managerial Accounting and Credit Analysis. This thirteen-day course further advanced IZDIHAR’s comprehensive program to build the capacity of Iraqi private banks and enable them to make loans based on the principles of cash-flow based lending techniques.

In attendance were four bankers that IZDIHAR identified as potential trainers for future credit analysis courses. These individuals received extra attention during the course and were asked to present parts of case studies and lead small group sessions. After performing especially well in the course, one of the attendees returned to his office at the headquarters of a local bank and trained six additional colleagues in the skills he developed through the training seminar.

Managerial Accounting and Credit Analysis provides students with the skills required to read and analyze balance sheets and income statements, prepare ratio analyses, and derive cash flows.  In addition, the course drills participants in preparing pro-forma financial statements and cash flow projections by using a largely exercise- and case-study-based approach.

Among the principal objectives of the course is to provide Iraqi bankers with the analytical skills required to substitute a more objective, numbers-driven credit approval process for the current model, which relies almost entirely upon the appraisal of collateral required to secure the loan.  By using a cash-flow-based lending methodology, the banks open up the large SME (small and medium enterprise) market sector, potentially a major engine of economic development, and a sector previously unable to access bank credit.  The course is delivered in Arabic and all course materials are in Arabic.

IZDIHAR has now trained a total of 75 bankers through this rigorous course, which is part of an extensive training program tailored to assist Iraqi banks in modernizing their lending techniques and upgrading the professional standards of their staff. The list of courses includes, among others: The Loan Officer Concept; Relationship Banking and Marketing; Goal Setting and Performance Planning; and Loan Documentation and Collateral.

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The Iraq Company for Bank Guarantees Launches Operations

14 December 2006 - The first ever Iraqi-owned loan guarantee facility, the Iraq Company for Bank Guarantees Ltd (ICBG), officially commenced business operations in November 2006.  SME loan applications presented for guarantee coverage review and appraisal in the first month of operations totaled US$450,000.

Using progressive lending methodologies and sound banking practices, ICBG’s professional staff is actively engaged in analyzing and processing eligible SME loan-guarantee applications from participating Iraqi Private Banks from the following sectors; Agriculture, Construction, Manufacturing, Services, Trade and Tourism.  The loan volumes range between the ID equivalent of US$5,000 to US$250,000 for:

• working capital loans up to 360 days in tenor; and
• fixed asset loans from 1 to 5 years in tenor.

The ICBG was established with technical assistance from the USAID IZDIHAR project and support from the Central Bank of Iraq in recognition of the important role such a financing concept plays in developing the local lending market.  ICBG is owned and capitalized by eleven Iraqi private banks with paid-in capital presently standing at US$3.7 million. Significant expressions of interest to join in the capitalization of the company have been received from three additional banks recently. Outreach to the remaining private banks continues, with the goal of formalizing an ongoing relationship with all 26 licensed banks in Iraq.

ICBG is fostering among the Iraqi private banks an SME lending capacity, to shift from an asset-based to a cash-flow-based lending methodology, and development of healthy corporate governance and loan administration practices.

As well, ICBG-guaranteed loans offered by participating banks are:

• enhancing access to credit for eligible small medium and micro-sized companies;
• increasing the ability of Iraq’s small and start-up businesses to grow and generate new jobs; and
• assisting private banks to develop new market sectors.

The company provides guarantees to banks in Iraq and does not deal directly with SMEs.  The Iraqi private banks handle the marketing, distribution, and administration of the guaranteed loans, and such loans are the financial assets of the banks. Certification is required from the presenting bank that due diligence and normal underwriting was completed in order to protect ICBG’s interests in accepting the risk of providing the guarantee on these loans.

The amount of the ICBG loan guarantees will vary with the risks that are ascertained, on a loan by loan basis. The guarantee applications submitted during the first year of operations may be granted coverage up to 75% of the approved loan amount, thereby ensuring that there be an incentive on the part of the banks to administer the loans properly because they have risk exposure.  Accrued interest is guaranteed for a period not exceeding 90 days.

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TV Series Profiles Small Business Owners Finding Success in Iraq

2 April 2006 – Eighteen Iraqi small business owners from throughout the country were recently profiled in a three-week prime time series on Al-Iraqiya television. 

The series, called “Nahwa Al-Izdihar,” which means “Toward Prosperity,” consisted of five-minute interviews following the nightly economic news with businessmen who are finding success in Iraq’s growing private sector and showing others that there is hope in the future. 

When asked about the obstacles to doing business in Iraq today, a hotel owner with plans to open a new riverfront facility replied, “As you know, the bad security situation is the first obstacle.  But my determination to serve my country’s people has helped me overcome these obstacles.”

“I was an employee for a long time,” said one businessman when asked about the differences between working in a government job and Iraq’s private sector.  “I prefer the private sector in order to develop the country and urge its people to depend on themselves but not depend on the government.”

The head of an oil products distribution company offered advice for those who are thinking about establishing a business in Iraq.  “I call on all our brothers who are now outside the country to return and start investing inside their mother country because the future will be here.”

Al-Iraqiya satellite television is one of the most popular channels in Iraq and can be seen throughout the country.

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Iraqi Bankers to Establish Loan Guarantee Company

9 January 2006 – Iraqi bankers recently formed an Advisory Committee to establish a private company which guarantees small business loans and select microfinance institutions in order to expand access to credit for private sector firms throughout the country.

Working with the assistance of USAID’s IZDIHAR project, the Committee concluded that the 24 private banks operating in Iraq will be the founding owners of the Al-Iraq Bank Guarantee Company, the new organization that is being created to provide loan guarantees for well-appraised projects of small and medium sized enterprises and eligible microfinance institutions.

The new loan guarantee company will be the first of its kind in Iraq, where small and medium business borrowers presently need hard collateral to access loans since lenders do not have adequate legal recourse if a borrower defaults.  The guarantee company is being established on the basis of best practices worldwide.

The new company will enhance access to credit for eligible small, medium and micro-sized companies as well as support the use of modern credit methods, sound banking practices, and the ability of Iraq’s small and start-up businesses to generate new jobs.

25 September 2005 - The USAID IZDIHAR project recently conducted managerial accounting and credit analysis training in Amman, Jordan for 22 Iraqi bank lending officers.

The training program tripled the number of Iraqi private banks that are now participating in IZDIHAR’s lending program that encourages a new business loan to be based on an analysis of a firm’s cash flow rather than the value of collateral it pledges.

With six banks now participating in the program, IZDIHAR is working with private banks to make credit available to a larger pool of businesses in order to more rapidly expand the private sector and generate long-term jobs in Iraq.

12 September 2005 - Staff from USAID’s IZDIHAR project recently met in Baghdad with 35 board members from Iraq’s private banks to set the strategy for development of the banking industry in Iraq and to disseminate “best practices” standards of international banks.

The session included a briefing of the economic and monetary situation of the banking industry and its impacts for Iraq’s private banks, comparisons of Iraqi banks with operations of other banks in the Arab region, and discussions of banking products that serve the needs of customers and can produce additional revenue for the banks.

“Some of the new banking products that were discussed are new to us,” noted one banker who attended the meeting. “We have never heard of them before.”

“During the period of Saddam, no one could hold sessions or meetings regarding the development of the banking sector,” he added. “It was forbidden. Holding this session is like transferring businessmen from the darkness to the light.”

1 September 2005 - Twenty-five members of an Iraqi private banking association recently met in Baghdad to discuss the credit needs of Iraq’s small and medium enterprises (SMEs). Led by banking experts from USAID’s IZDIHAR project, the event was attended by senior managers from eleven major Iraqi banks, along with representatives from USAID, the Iraqi Finance Ministry, and the Central Bank of Iraq.

IZDIHAR is working closely with private banks to introduce cash-flow based lending to small and medium enterprises. Current practice in Iraq requires large collateral pledges in order to access private credit, making it difficult or impossible for many SMEs to obtain the financing they need to grow.

The bankers supported adoption of the new methodology and several suggested that the project’s pilot group of banks could be expanded.

Establishment of a loan guarantee facility, which would allow banks to pool funds and share risk, was also discussed. Similar guarantee facilities set up in Egypt in Jordan have been successful in encouraging bank lending to small and medium enterprises.

A government official stated, “This is the first time I have ever seen such a candid and important discussion about the financial sector in Iraq.”

IZDIHAR provides technical assistance to partner banks through training, advocacy, and information technology.

30 June 2005 - The USAID Iraq Private Sector Growth and Employment Generation project recently developed a new lending system for private Iraqi banks. The system is being provided to partner banks that are beginning to lend money to small and medium sized businesses in the new Iraq.

The lending protocol helps private banks analyze loan applications, standardize terms and conditions of loans, establish new policies on collateral, and provide a customer-oriented lending approach to businesses.

The system already is being rolled out to two private banks that are beginning to lend money using these new procedures. Four additional banks will begin using the system later this summer.

The USAID project also will provide partner banks with training on goal setting, performance planning, and marketing.

The objective of the program is to strengthen lending programs for small and medium sized enterprises so they can help provide sustainable employment opportunities for people in Iraq.

20 June 2005 - As a result of a private bank loan based on new credit analysis procedures, a dental clinic in central Iraq will be able to purchase new diagnostic equipment that will help to provide improved dental care for area children.

The clinic, which has been operating without access to updated equipment for more than a decade, is in the process of acquiring a state-of-the-art machine that will help diagnose dental care needs in young patients who may require specialized treatment. The equipment will enable the clinic to offer the latest in diagnostic techniques so that kids can receive the proper care for their teeth.

The purchase of the equipment was made possible by a $70,000 local bank loan, using credit analysis procedures and a loan package developed by the USAID Iraq Private Sector Growth and Employment Generation Project.

The loan for the equipment is the bank’s first using its new credit procedures, which are designed to help expand its pool of potential borrowers by focusing on a creditor’s ability to repay rather than basing all loans solely on the borrower’s pledged assets, or collateral.

The overall goal of the program is to create sustainable employment opportunities for Iraqis and to help the country transition from a public sector, state-led economy to a private sector-led, demand driven economy.

16 June 2005 - More than 60 bankers and members of Iraqi business associations recently took part in a one-day workshop in Baghdad to discuss their mutual needs for changing the traditional ways of bank lending in Iraq.

The workshop was organized and led by staff from the USAID Private Sector Growth and Employment Generation Project.

The event was the first of its kind in central Iraq, linking business association members with senior executives of private banks. It was designed to be a forum where each group learned of the other’s needs regarding the challenges of obtaining business loans and meeting restrictive lending procedures.

The workshop also served to educate business persons on the type of loan assistance available to them and generate demand for loans that utilize new credit procedures which are being implemented by the project’s partner private banks.

Until recently, private banks in Iraq traditionally loaned money only to businesses which could put up a building as collateral for a loan.

By implementing cash flow-based lending procedures, the private banks will be able to enlarge their pool of potential business clients, which will help strengthen the private sector and create more jobs in Iraq.

By learning about the new process for obtaining private bank loans, local business persons will be able to access credit more easily, expand their businesses, and generate sustainable employment growth.

It’s a win-win situation for business persons and bankers in the new Iraq.