Iraq is moving towards electronic cards.. Will they be successful in withdrawing trillions of dinars deposited in households?

The optimism of Issam Bassem al-Jubouri, a citizen of the Iraqi capital Baghdad, was evident when he registered for a new electronic payment card with a financial fee of 10 thousand dinars ($7.5) through a branch of Rafidin Bank (government) And receipt time of 15 minutes.

Al-Jubouri says – from Al Jazeera Net – that this step is very important, especially for household and electronic purchases, promotion through social networking sites, and payment when refueling your private car from government and private stations. Too. The importance of this move was emphasized to ease the cash flow in the market.

In June 2023, the Central Bank of Iraq announced that Decision No. (23044) of the Iraqi Council of Ministers for the year 2023 has come into force, which aims to increase the number of electronic payment instruments in government institutions and the private sector. To enhance the culture of electronic payments and collections, and to reduce the use of paper currency in collections and commercial transactions.

5- Mustafa Akram Hantoush - Al Jazeera Net
Hantoush expects success of Iraq's experiment with cash-electronic payment cards (Al Jazeera)

Does the experiment work?

For his part, economic academic Mustafa Akram Hantoush believes Iraq's experiment with electronic payment cards will be successful because it had been transacting in cash for years before that. Speaking to Al Jazeera Net, Hantoush attributed the success of this experiment to the presence of large amounts of cash in the market, and everyone is suffering from the loss of liquidity due to the risks of burning, damage and theft.

Hantoush also reported that “Iraq had previously issued more than 10 million electronic cards from companies affiliated with state banks or from other payment companies, which were valid for 7 days after the start of monthly salaries. So much so that today the government's approach This has been done as a condition of reservation, continuity of working with the card on all days of the month.” 20% of the value of monthly incentives and rewards within the card, not the size of the employee's basic salary, so that purchases can be made electronically as the card has a zero pricing policy, which is expected to increase soon after (20-25) million cards are issued. Hantoush emphasizes the importance of increasing electronic payment devices from 23 thousand to 800 thousand devices throughout Iraq to increase usage levels.

6-Haider Al-Rubaie - Al Jazeera Net
Al-Rubaie called for strengthening banking culture to encourage citizens to plan and save (Al-Jazeera)

weak marketing culture

On the other hand, experts see a major weakness in the banking marketing culture inside Iraq, leading economic researcher Haider Falih al-Rubaie to urge the central bank to strengthen it. Increase the use of electronic payment cards to extend bank credit and transfer funds stored in households for transaction purposes and a guarantor force in generating demand for funds to support economic activity.

Al-Rubaie – in Al Jazeera Net – said that “promoting banking culture is no longer a luxury, but rather encouraging citizens to plan and save for their future and prepare for crises or emergencies that may occur at any time.” There is a need to protect ourselves from. Developing our financial capabilities to deal with the tremendous global growth in technology.” finance.

Al-Rubaie pointed out the importance of updating the information about the services provided by the two banks (public and private) so that it is clear and easy to understand and by providing adequate guidance tools inside the bank halls and branches without Can be reached without any difficulty. , and on the official website of the bank.

The amount of deposits in public and private banks is (128 trillion dinars), distributed between private and public banks, as there are (72 private banks) in Iraq, of which (19 banks) are on the sanctions list of the US Treasury Department. , while the volume of deposits in private banks is approximately 14.1 trillion Iraqi dinars ($10.5 billion). For the six government banks, the volume of deposits is approximately 114 trillion dinars ($87 billion), which means that 90% of the deposit volume is in government banks.

4-Electronic Payment Card (Al Jazeera Net)
Demand for the use of electronic payment cards is still low in Iraq (Al Jazeera)

hoarding inside homes

Dr. Mazhar Muhammad Saleh, a financial adviser to the Iraqi government, estimated in statements to Al Jazeera Net that more than $95 trillion of Iraqi currency is held outside the banking system, that is, in homes and other locations by individuals, indicating that hoarding The phenomenon of hoarding does not provide flexible financial leverage at low cost to finance economic activities because it leads to a decline in the ability to transfer desired savings to desired investments due to stagnation of liquidity outside banks. Formation is a deduction from the national income cycle, according to Counselor Saleh.

While Omar al-Halboushi, a banking affairs researcher, attributes the reluctance of Iraqi citizens to deposit their money in Iraqi banks to a set of factors, including citizens' lack of confidence in the banking sector, especially after the collapse of the after. A group of banks that have not returned depositors' money even after years have passed.

Al-Halboushi spoke about other factors, including political interference in the banking sector, in his interview with Al Jazeera Net. He also pointed out that “the weakness of the Central Bank of Iraq in controlling and supervising the work of banks is another factor leading to hoarding.”

According to al-Halbousi, ownership of private banks by people accused of corruption or by outside parties is a factor in domestic hoarding, with the imposition of US sanctions on a group of private banks being another factor that supports the hoarding trend. .Regarding public sector banks, frequent corruption scandals became a reason. Even reluctance.

To remove the huge amounts of cash stored in households, Dr. Mazhar Muhammad Salih, financial advisor to the Iraqi government, suggests that this should be done by substituting electronic payment systems, which effectively divert cash income within the banking system cycle. and continuously, thus reducing the incidence of cash leakage out of Iraqi banks.

Saleh believes that the expansion of electronic payments and subsequent expansion of bank accounts will reduce the liquidity risks that banks are exposed to due to uncertainty in maintaining ineffective cash surplus to facilitate lending and credit operations. Are. The incidence of liquidity risk will be reduced, and will serve the interest of encouraging and expanding the phenomenon of cash credit and lending in a flexible manner.

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