NOWROZ –University Duhok “FINANCIAL INCLUSION” 21-22/April / 2018 NOWROZ –University Duhok Iraqi Private Banks League IPBL

Snapshot of the Iraqi Banking Sector The Iraqi banking sector has been growing steadily during the past 5 years Metric 2012 2016 % Growth Total Capital 4.9 billion 9.7 billion 98% Total Assets 200 billion 221 billion 11% Deposits 20 billion 51 billion 154% Capital and Reserves 9 billion 12 billion 33% Number of Banks 54 72 Number of Branches 972 1,068 10%

Recent Developments in the Iraqi Banking Sector The IPBL is working together with the CBI to draft and implement new regulations to take the sector forward; the IPBL has a seat on the board of the CBI. Compliance Risk Management Corporate Governance Infrastructure & Reconstruction Liquidity & Credit The Central Bank of Iraq (CBI) issued a globally compliant AML Law in 2015 & (CAMEL) Evaluation criteria & IFRS reporting standards The CBI issued new instructions on risk management in 2016 and is working towards the objective to have all Iraqi banks compliant to the latest guidelines of the BASEL II. The CBI issued a manual with principles on corporate governance for banks in 2016, which it has required all banks to comply with The private banks are getting ready to be involved in major projects related to reconstruction of post-war infrastructure, most of which are expected to come online in 2018 Several initiatives are underway to increase availability and accessibility of credit and liquidity to Iraqi public, with a focus on private businesses and financing SMEs to drive a surge in the economy

Reasons to be Optimistic about the Future Cleared out “ISIS” and Improving security situation, healthier fiscal policy and sounder regulatory environment are among the factors that lead us to be optimistic about the future of the banking sector in Iraq There is significant investment potential in the reconstruction of damaged areas. There is significant focus on increasing financial inclusion. Leading international professional services firms (such as E&Y, KPMG, PWC) are increasingly active in Iraq. Significant focus on developing the Iraqi economy by the Regional & International Organization.

financial inclusion The World Bank revealed the achievement of Iraq rates of financial inclusion by 11%, noting that the Arab rate of up to 27 % All government employees salaries to be paid through Banking Accounts . CBI initiative to grant a loan of $ 5 billion "6.5 trillion dinars" to strengthen the strategy of financial inclusion Through financing SME’s. Regional Initiative to Enhance Financial Inclusion of Arab Countries to Reduce Poverty and Achieve Economic Growth sponsored by AMF.

The Challenges Ahead Need to establish deposit guarantee Fund ASAP IPBL is working closely with CBI & PM office to address these challenges. difficulty in establishing correspondent banking relationships. Need to establish deposit guarantee Fund ASAP   *Unfair competition with state banks *Reopening the branches inside the damaged Governorates Adopting Governance culture is one of the beg challenges Training on the international experience and knowhow How to adopt latest technology to local culture? Banking Correspondence Public Trust Competition with State Banks Rebuilding Damaged Branches Governance Human Resources Information Technology

Financing SME - Operating Agreement: Invest-Fund and Shareholder Banks Funds Distribution Facility Operation Records and Reporting Loan or Grants Conversion Distribution Reallocations Dinar-Base SME loans exclusively A. Allocations ■ Conditions - SME loans - Pay fees - Compliance ■ Notifications Increase B. Loans ■ Eligibility. ■ Categories. ■ Funding %. ■ Pricing Framework. ■ No Credit Exposure. SME loan Account Transactions Entries Reporting; - Movement - Nature of loan - Loan Total Training Loan Performance Assessment Scoring Method Grant Conversion to Shares Entitlement Shareholder Capital Contribution 2 7

Financing SME - : Flow of Funds Invest-Fund Resets quarterly allocations Allocations are ICF-SME assets Collects 4% p.a. fee on allocations ID $ BANK ( $ to ID) ID Liabilities Owed ICF-SME SME Borrower BANK SME Revolving Loan Account ID Repayment ID ID Capital Contributions and Periodic Fee Payments All cash extended to banks are bank liabilities repayable back to the Invest-Fund 3 8

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