Evaluation of bank credit
28/6/2018 12:00 am
Dr.. In the name of Brahimi
Some criticize the Iraqi banks in the context of the weakness of credit provided to the investment fields and thus releases the general provisions of failure to perform their traditional role without working to dismantle the problem in the framework of scientific analysis to examine the reasons and the specificity of the environment in which the Iraqi banks and the impact on
Nature of its work.
Is the imbalance in the Iraqi banks is an institutional defect or is it a natural situation within the facts of reality? What did the central bank do to address this?
If we look at the financing provided by the Iraqi banks to the productive sectors, we find that it is still weak and according to the index of financial depth Represents the credit ratio of The banks to the gross domestic product we find that this indicator is very weak in Iraq compared to the nearest neighboring countries,
but if we analyzed the indicators of the investment environment and the size of the risks to the local investor, we find that this size by the banks have rational reasons, especially if we know that Bank default rate is close to nine percent.
Banks are therefore profitable institutions and not civil society institutions.
Therefore, within the framework of investing their capital, they balance the return and the risk and therefore seek to increase the return
In order to face this, the Central Bank has adopted over the past years a development initiative worth five trillion dinars for residential, industrial and agricultural projects within the framework of unconventional monetary policy tools after the global financial crisis.
The central bank has provided this funding at low interest rates, especially that bank interest rates are relatively high
As the latter is unable to reduce them and thus contributed to the initiative of the Central Bank to reduce production costs for projects, but that alone is not enough
The reason is that other production costs related to administrative costs, transport costs and wages as well as some other operating costs have all reduced competitiveness
For a local product in front of a foreign product, that means Poor bank financing was not the main reason Domestic production is declining and the problem is being addressed
The study of the causes of the problem at the macro level And partial without continuing to load the banks all responsibility.