Publication Details
Abstract
The paper explores the financial inclusion situation in Iraq in 20212024, its major indicators, dynamics, and obstacles and suggests the ways to improve financial service accessibility. Financial inclusion, which is considered one of the global economic growth drivers, poverty eradication, and social development is a crucial aspect in Iraq because of the economic and security issues the country is facing. The research is conducted through the descriptive analysis, correlation analysis, and regression analysis which include six indicators that are usually core: the percentage of the population possessing bank accounts, the amount of bank branches per 100,000 of the population, the total amount of loans that are granted to individuals, the amount of electronic payment, the use of electronic payment, and microfinance participation. The outcomes show that there has been a positive trend in all indicators within the four-year period. Bank account shares among the population increased by 20 to 35 percent, and the bank branches per 100,000 population were 5.5 to 8. The cumulative loans that individuals were given increased to 160 billion IQD and the volume of electronic payments increased by a big margin to 130 billion IQD and the rates of adoption increased to 30 percent to 10 percent. The involvement in microfinance also increased to 18 percent against 5 percent as it is seen to have reached the unbanked. Correlation analysis has demonstrated that bank account ownership and total loans have strong relationships of +0.99 and electronic payment usage with +0.98 whereas, microfinance has negative relationships with traditional banking services at -0.24. Several linear regressions showed the positive impacts of loans, e-payments, and the use of digital payments on owning a bank account, and the dependence on microfinance could replace the use of financial services. The statistical significance of the correlation between the bank account ownership and the electronic payment usage according to the chi-square test was not statistically significant, probably because of the few observations. This paper finds that the situation of financial inclusion in Iraq is slowly improving, in terms of digital financial services and credit growth. Nevertheless, the issues still exist such as insufficient awareness, geographic inequalities, and use of other mechanisms of financing. The study proposes promoting the adoption of digital payments, increasing loan access to individuals and small businesses, promoting the adoption of bank accounts, and collecting more specific and geographically disaggregated data to increase the level of financial inclusion. Such efforts will enhance the process of sustainable economic development, enhance financial access, and decrease inequality in the Iraqi society.