Download Archit Baskaran Brookfield East High School Microfinancing in the

Archit Baskaran
Brookfield East High School
Microfinancing in the Developing World
Iraq
It is currently understood and regretted that the turn of the 21st Century has
presented a detriment to developing global entities seeking to entrench political power.
The fundamental tenet of such power and self-sustainability lies in the nurturing of a
powerful economy. However, the status quo presents mankind with a plaguing issue:
poverty and economic disparity. Ultimately, in a state of desperation, countries are forced
to procure any means of gathering capital. Within this difficult situation emerges an
exemplary innovation referred to as microfinancing. Microfinance institutions (MFIs)
have globally served their purpose in developing countries as financial intermediaries of
better quality of life, serving as an ideal alternative to unnatainable and corrupt money
lenders. As a country ravaged by hostility and poverty stricken by a post-conflict
environment, Iraq recognizes the imperative role of the microfinance sector and its
positive influence in reaching out to the poor alongside bridging socio-economic strain.
For the reasons that microfinancing drives economic flexibility essential to social reform,
serves as an auxiliary mechanism for the weak financial sector run by corrupt capital
markets, and simply mitigates rising poverty disparities, it is our moral obligation as the
United Nations to see to its implementation.
In efforts to maintain autonomous rule, the Iraqi population has undergone
significant losses in social welfare. Following the US invasion of 2003, microfinance
institutions were implemented as the sole contraption for providing victims of war and
violence the basic necessities required for adaptability to the war-stricken environment.
In doing so, it propelled itself (over time) to emerge as the sole provider of sustainable
financial services allowing low socioeconomic status groups to access exceptional social
welfare benefits. Iraq’s USAID-Izdihar, a provincial economic growth project in
collaboration with the United States, established domestic microfinance institutions to
ensure the presence of one MFI in each province to enable private sector expansion.
Moreover, over 4.7 million Iraqis have left their homes as a result of the conflicts of
which 2.7 million have been internally displaced. Quintessential in bridging these large
numbers, MFIs are providing indispensable micro-loans to Internally Displaced People
(IDPs) by extending loan criteria flexibility. By removing excess restrictions (such as the
requirement that clients must have lived in the same neighborhood for a minimum of two
years to qualify for a loan), financial opportunities are expanding to large segments of the
unrepresented citizenry.
At its central core, the banking system in Iraq remains debilitated. Dominated by
two state-owned banks— Rafidain and Rasheed— which account for 90% of internal
assets, 22 other Islamic banks reach out to a small minority of the vast population. A
skills deficit attributes itself to the lack of management in capital markets, ultimately
warping an ideal system into one of pure inefficiency. Examples of such inefficiency
manifest themselves in banks’ lack of analyzing credit risk or conducting cash-flow
analyses. With a credit:economy proportion of GDP less than 5%, Iraq is left with a
nonexistent means of banking and credit. This is where microloans fill the gap more or
less. The newly developed Iraqi Company for Bank Guarantees acts as a small-medium
business enterprise guarantee institution that provides on-lending capital to banks for
business borrowers. With a majority of loans circulating in the SME sector, the capital
market system on a national scale is improving on a fundamental level.
Poverty remains a burden in Iraqi society. With a poverty line of $2.20, high
unemployment rates, and compounded lack of security, rehabilitation is imperative. The
World Bank reports that the even a relatively small increase in individual income could
lift a majority of the impoverished population above the poverty line. Although
seemingly significant in nature, the marginal benefit is a double-edged sword. While it
can potentially get rid of our issues with one accurate incision, it can at the same time
reverse its effect on the beholder. In essence, this means that even a minor retrogression
of economic conditions could destabilize an even larger number of people. By foraying
assets into the mainstream financial sector, MFIs are providing bigger loan sizes ranging
from five-thousand upwards to local businesses. Providing loans to over 4000 enterprises,
the loans are ultimately deterring economic blackout by driving up employment rates
alongside allowing capital to circulate internally within organizations. Thus, it proves to
not only be a mere materialistic benefit, but one of social progress. Fellow delegates, in
considering legislation as a unified body, we must take the best interests of our
neighboring men and women. The sole means of relinquishing the issue of poverty and
making stable the lives of thousands, micro-financing substantiates itself as a utopian
ideal in our disturbed state of affairs. It is our moral obligation to recognize this idea and
advocate for a society in which business can flourish and individuals can invest and
generate capital—because that is an ideal society.
Works Cited
US-Aid. “State of Iraq’s Microfinance Industry.” June 2010. http://www.tijara-iraq.com/
US-Aid. “The Iraq Microfinance Strategy.” 25 Feb 2007. http://www.izdihariraq.com/resources/papers_pdfs/izdihar_iraqmicrofinance_strategy_031607_final_web.pdf.
MicroCapital. “Iraq’s Microfinance Sector: A Survey.” 23 Oct 2006.
www.microcapitalmonitor.com/
US Department of State. “Microfinance Builds Iraqi Economy.” 10 Jan 2007.
merln.ndu.edu/archivepdf/iraq/State/78700.pdf