Decades of conflict have ravaged oil-rich Iraq, which has struggled to diversify its economy, develop the banking sector and respond to crises. In 2020, the COVID-19 pandemic and a decline in global oil demand drove a 10.4% contraction in the Iraqi economy1 and brought the poverty rate to an estimated 30% of the population.2 Inflation and unemployment are high, and the International Monetary Fund (IMF) predicts growth of a mere 1.1% in 2021.3 Meanwhile, security concerns related to ISIS, tensions with Iran and political instability remain a challenge to this emerging market.
As Iraq seeks to recover in the wake of the pandemic, war and other conflict, regulators must ground economic initiatives in digital transformation. Expansions in digital infrastructure, the adoption of innovative technologies like AI and big data, and digital banking will be particularly important areas to watch. Iraq’s partnership with Gulf Cooperation Council (GCC) states like Saudi Arabia, the United Arab Emirates and Kuwait could be its solution to securing the funds and other support it needs to pursue ambitious structural reforms. GCC states have already contributed to Iraqi reconstruction efforts,4 and Iraq stands to benefit further from their wealth, stability and intense digital momentum.
Although Iraq’s fintech ecosystem is in its infancy, with only fourteen fintechs in the country,5 there is reason for optimism. Iraq relies mostly on the 3G network6 and internet speed is slow,7 but internet penetration is relatively high at 75%.8 Demand for mobile and electronic payment services is rising,9 and recent successes in the sector could pave the way for followers. In August 2020, an Iraqi company—in partnership with a Lebanese fintech and Visa—introduced the country’s first digital-only payment card,10 and the country’s first fully digital bank went live in September 2021.11 A more robust fintech ecosystem would help Iraq in diversifying and growing its economy, bolstering financial inclusion and expanding employment opportunities.
This year, Iraq has focused on digitalization in payments, overall digitalization and financial inclusion. The state has sought to adopt new biometric voter cards for its 2021 election, but the rollout of the cards has been delayed, amidst other problems.12 As Iraq digitalizes, regulators must institute a national data protection framework, beef up cybersecurity and ensure that vulnerable communities like displaced people are not further excluded.
Financial Regulatory Authorities
The Central Bank of Iraq (CBI) is the country’s central bank.
The Iraqi Securities Commission (ISC) regulates the capital market and seeks to protect investors.
Policy, Laws and Regulations
Digital Landscape Assessment, 03 August 2021
Iraq is receiving the help of the United Nations Development Programme (UNDP) and the e-Governance Academy in devising a digital landscape assessment (DLA), which will evaluate the state’s digital progress and supply recommendations towards boosting digitalization. According to the UNDP’s press release, “Building on the assessment upon its completion, a Public Sector Digital Transformation Roadmap is planned to be developed to establish the baseline for Iraq’s digital governance, identify the strategic priorities for digital transformation in the public sector and outline the main building blocks of a digital society while tackling challenges and bottlenecks– e.g. secure data exchange, digital identity and digital signature for citizens and businesses, data security and capacity development– along with proposals for the institutional, financial and legal framework of e-Governance.”13
Iraqi-Egyptian Digitalization Partnership, 18 June 2021
Iraqi Minister of Communications Arkan Shahab and Egyptian Minister of Communications and Information Technology Amr Talaat signed a memorandum of understanding in an effort to facilitate the exchange of information related to IT and communications. Key areas of cooperation include cybersecurity, research and development, telecom infrastructure, digitalization, legislation and regulations, technology parks, innovation, entrepreneurship, satellites and digital Arabic content. The two ministers plan to launch a joint committee to develop short-term, medium-term and long-term plans for the digitalization of Iraq.14
Digitalization in Payments, 19 April 2021
The central bank has partnered with Mastercard to promote cashless payments and financial inclusion in Iraq. The collaboration will initially focus its efforts on building a digital payments ecosystem for the education sector, with plans to expand into other sectors. According to Mastercard’s press release, “The Mastercard partnership with CBI is a starting point that will allow for the development of a full digital ecosystem in Iraq, which will cover key pillars including the use of Public Policy and Regulation to curb the shadow economy, a wholesale modernization of the payment ecosystem, and the digitization of key value chains. Those include government collections and disbursement and peer-to-peer and consumer spending, as well as business purchases and salary payments.”15
1. “Iraq's Economic Update — April 2021.” The World Bank, 02 April 2021. https://www.worldbank.org/en/country/iraq/publication/economic-update-april-2021.
2. Fordham, Alice. “In Iraq's 'Dire' Economy, Poverty Is Rising — And So Are Fears Of Instability.” NPR, 03 February 2021. https://www.npr.org/2021/02/03/961149079/in-iraqs-dire-economy-poverty-is-rising-and-so-are-fears-of-instability?t=1631116345397.
3. “Iraq.” International Monetary Fund. https://www.imf.org/en/Countries/IRQ.
4. “The GCC can strengthen Iraq.” The National News, 01 February 2021. https://www.thenationalnews.com/opinion/editorial/the-gcc-can-strengthen-iraq-1.1158370.
5. “FinTech Startups in Iraq.” Tracxn, 05 September 2021. https://tracxn.com/explore/FinTech-Startups-in-Iraq.
6. Blaubach, Thomas. “The 5G divide in the Middle East: Further disparity between the Gulf and its neighbors.” Middle East Institute, 20 May 2021. https://www.mei.edu/publications/5g-divide-middle-east-further-disparity-between-gulf-and-its-neighbors.
7. “Iraq's Mobile and Fixed Broadband Internet Speeds.” Speedtest, July 2021. https://www.speedtest.net/global-index/iraq.
8. Kemp, Simon. “Digital Iraq: 2021.” DataReportal, 11 February 2021. https://datareportal.com/reports/digital-2021-iraq.
9. Lewis, Sharon. “The Ultimate Snapshot of Fintech in 10 Arab Countries.” Fintech News, 08 August 2021. https://fintechnews.ae/9479/fintech/fintech-in-arab-countries/.
10. “IRAQ-BORN FINTECH COMPANY INC LAUNCHES COUNTRY’S FIRST DIGITAL PAYMENT CARD ‘NEO’.” Startup Scene, 31 August 2020. https://thestartupscene.me/INVESTMENTS/Iraq-born-Fintech-Company-INC-Launches-Country-s-First-Digital-Payment-Card-Ne.
11. “First Iraqi Bank goes live on ICS BANKS Digital Banking solution from ICSFS.” IBS Intelligence, 06 September 2021. https://ibsintelligence.com/ibsi-news/first-iraqi-bank-goes-live-on-ics-banks-digital-banking-solution-from-icsfs/.
12. Hersey, Frank. “Biometric card delays ‘exclude millions’ from Iraq elections.” Biometric Update, 30 June 2021. https://www.biometricupdate.com/202106/biometric-card-delays-exclude-millions-from-iraq-elections.
13. “Innovation first: new initiative by UNDP digitalizes Iraq’s public sector.” United Nations Development Programme in the Arab States, 03 August 2021. https://www.arabstates.undp.org/content/rbas/en/home/presscenter/articles/2021/innovation-first--new-initiative-by-undp-digitalizes-iraqs-publi.html.
14. “Egypt to help Iraq implement digital transformation and govt service automation projects.” Ecofin Agency, 23 June 2021. https://www.ecofinagency.com/telecom/2306-42774-egypt-to-help-iraq-implement-digital-transformation-and-govt-service-automation-projects.
15. “Mastercard Enters into Strategic Partnership with Central Bank of Iraq to Advance Digital Payments in the Country.” Mastercard, 19 April 2021. https://newsroom.mastercard.com/mea/press-releases/mastercard-enters-into-strategic-partnership-with-central-bank-of-iraq-to-advance-digital-payments-in-the-country/.
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Last updated: November 2021