Business | Banking
Iraq's Rafidain bank opens first automated branch in Baghdad
Iraq's national museum was not the only institution to be devastated by looters during the 2003 US-led invasion. But, among all the other cases, the ransacking of the country's banks has had arguably the most profound impact on the post-war economy.
- By Ferry Biedermann, Financial Times
- Published: 23:39 May 22, 2009
Iraq's national museum was not the only institution to be devastated by looters during the 2003 US-led invasion. But, among all the other cases, the ransacking of the country's banks has had arguably the most profound impact on the post-war economy.
The banking sector is still struggling to overcome its past as a pillar of Iraq's command economy, the legacy of the war and the preceding years of sanctions, international isolation and neglect.
Rafidain, a state bank and by far the country's biggest, recently reached a milestone when it opened its first automated and inter-connected branch in Iraq - in Baghdad.
While better equipped private banks have made inroads in Iraq in recent years, the impact of the modernisation of Rafidain on ordinary Iraqis is likely to be huge. "This will bring confidence back," says Gassan Al Obaidi, deputy director of the Central Bank of Iraq who is in charge of information technology projects.
Most of Iraq's retail banking transactions still take place at isolated branches and are entered in hand-written ledgers.
Inter-branch transfers are impossible or difficult, as are inter-bank transfers. Automated teller machines are thin on the ground and what credit cards are issued are mostly meant for use abroad.
The poor banking network has meant that Iraqi soldiers have had to take days off to deliver salaries to their families, impeding the fight against insurgents.
Al Obaidi says Iraqis still have to take large amounts of cash with them when they travel in their own country, have to queue in banks to deposit salaries and often cannot access all of their money.
The country's antiquated banking system poses security risks, creates opportunities for crime and hinders commerce. "Iraqis are dreaming of purchasing things over the internet," Al Obaidi says.
Shirko Abed, the Iraqi born chief executive of B-Plan, a British company that is helping to modernise Rafidain, emphasises that progress has been slow because of the security situation.
"We had a hell of a time. Security was just impossible. What should take one week took more than two months," he says.
Other obstacles include bureaucracy and a profound lack of knowledge on many levels, from IT to the English language, to modern banking skills. Capacity building remains crucial, says a B-Plan employee. "Our courses go right from 'This is a mouse' and 'This is a keyboard' to 'This is a core banking system'."
Rafidain and Rasheed, another large state retail bank, together handle most government accounts, including pensions, soldiers' pay and civil service salaries. Together, they handle more than 90 per cent of the nation's retail banking.
Rafidain alone announced deposits amounting to more than $14 billion (Dh51 billion) at the beginning of last year, and the bank says it made a profit of $277 million over 2006 and 2007.
After the US-led invasion of 2003, only 30 of Rafidain's 147 branches remained operational. The rest were looted, recounts Abdul Hussain Al Jazeri, the bank's chairman and general manager.
Speaking by phone from Baghdad, he recalls that in 2005 outside consultants advised that the bank be liquidated.
"But management carried on and decided to restructure and modernise," Al Jazeri says.
Rafidain is described by many as a sleeping giant. It has massive deposits and a huge customer base but, says one foreign banker, its business lines are not lucrative and its assets are underused.
Important trade and finance transactions flow mostly through the Trade Bank of Iraq, a third state bank which was established specifically to facilitate exports and imports after the invasion.
TBI was set up together with a foreign consortium led by JPMorgan, and thus has international partners and operates according to international standards.
It introduced Iraq's first international credit card, from Visa, in 2005, and has a small network of ATMs.
"What differentiates TBI from the other state-owned banks is that it deals with international transactions while the others deal only locally," says Hussain Al Uzri, Trade Bank's chairman.
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