High interest in Iraqi banks reduce the demand for credit
September 17, 2009
He explained that the main reason for the imposition of high interest rates on loans by Iraqi banks is the security and legislative threats which contributed greatly to the suffering of banks to recover their debts, producing a decline in demand for credit of 25%.
Al-Handal called for amending the Banking Act, particularly Article 28 which prevent the participation of private banks in investment projects and partnerships in various sectors such as industry, pointing out that the law allowed banks to set interest rates on credit, and for some of them reached 25%, noting that the security is often a real estate which is difficult to sell because of the results that may arise during the sale, especially after 2003.
He expressed astonishment that the names of some Iraqi banks coupled with the word investment, while they are banned from it, and their activities are confined to the issuance of guarantees, letters of credit and loans constrained by credit rates compared to capital and reserves, making most of those banks reluctant to grant loans in order not to intersect with the instructions of the Iraqi Central Bank.
Officials in the Iraqi Central Bank said that the proportion of credit to GDP in Iraq, does not exceed 4% despite the high number of Iraqi and foreign banks in Iraq and the increase of their capital and deposits.(Source)AswatIraq