Pub­lic banks have failed to adapt to mod­ern in­ter­na­tional bank­ing sys­tems

The Kurdish Globe - - NATIONAL -

Ex­perts be­lieve that fail­ure to adapt to new bank­ing sys­tems and loss of peo­ple’s money in Iraqi and Kur­dish pub­lic banks in the past, are among the ma­jor fac­tors be­hind the weak­en­ing trust in pub­lic banks in Kur­dis­tan.

Iraqi banks have gone bank­rupt sev­eral times in the past; be­gin­ning in 1961 when a law changed all banks to pub­lic banks and peo­ple con­se­quently lost all their sav­ings.

In 1991, af­ter the with­drawal of the Baathist regime from the Kur­dis­tan Re­gion, the re­gion’s banks went bank­rupt once again, with the peo­ple once again bear­ing the cost.

A most re­cent in­ci­dent was the dis­ap­pear­ance of a large amount of money at the Fed­eral Bank in Er­bil, a lo­cal pub­lic bank.

Dr. Mo­hammed Sal­man, eco­nomic ex­pert, ar­gues that th­ese in­ci­dents made the banks lose cred­i­bil­ity and trust among peo­ple.

Ab­dul­wahid Taha, eco- nomic ex­pert and Head of Me­dia De­part­ment at the Er­bil Cham­ber of Com­merce, says that peo­ple rarely use banks for their trans­ac­tions and they trust lo­cal ex­change and money trans­fer of­fices more than the banks, in both the pub­lic and pri­vate sphere.

“In ad­di­tion, the banks in the re­gion, whether pub­lic or pri­vate, are not con­nected to the other banks in the world,” added Taha.

Com­ment­ing on the im­pact of the re­cent in­ci­dent at the Fed­eral Bank, Shireen Rozh­bayani, the man­ager of the bank, where other such cases have oc­curred in the past, ad­mit­ted that some of their cus­tomers have with­drawn their monies from their ac­counts.

Af­ter three months the case is still un­der in­ves­ti­ga­tion by the po­lice in as­so­ci­a­tion with a team from the Min­istry of Fi­nance and Econ­omy.

Three em­ploy­ees from the bank and some other peo­ple have been ar­rested on sus­pi­cion of been in­volved in the in­ci­dent.

Dler Tariq, of­fi­cial spokesper­son of the Min­istry of Fi­nance, sup­ports the the­ory that the 1991 in­ci­dents weighed heav­ily on the trust peo­ple have to­wards the pub­lic banks.

Tariq, how­ever, ar­gues that peo­ple do trust pub­lic banks now and added that the money which dis­ap­peared from the Fed­eral Bank be­longed to the government rather than in­di­vid­u­als.

“How­ever, it is still nor­mal if some peo­ple re­main con­cerned about the money and with­draw it from the bank,” said Dler in an in­ter­view with the Kur­dish Globe. “No one will lose money at a pub­lic bank, and they al­ways get com­pen­sated in any case. Even in the past the Kur­dis­tan Re­gional Government (KRG) has com­pen­sated peo­ple for monies con­fis­cated by the Baathist Regime.”

How­ever, Sal­man ar­gues that peo­ple suf­fered fi­nan- cial losses due to the 1991 in­ci­dents, as the money they re­ceived as com­pen­sa­tion did not have equiv­a­lent value and pur­chas­ing power as at the time they lost it.

Sal­man re­ferred to statis­tics con­ducted by the Cen­tral Bank of Iraq in 2012 about peo­ple’s trust in pub­lic banks for one of his re­searches on the is­sue.

He claimed that ac­cord- ing to the statis­tics, only be­tween 2.5 and 6% of Iraqi’s trust the pub­lic banks in Iraq.

“The pro­ce­dures and reg­u­la­tions of the pub­lic banks are not suit­able and have hence failed to at­tract peo­ple to them,” Sal­man told the Globe. “When peo­ple put money in a bank, they get a very low in­ter­est while they pay a high in­ter­est on loans.”

Although banks play a sig­nif­i­cant role in driv­ing eco­nomic growth in most coun­tries, banks in Kur­dis­tan have failed to at­tract peo­ple’s sav­ings and use them for in­vest­ment pur­poses. One ma­jor fac­tor be­hind this would is the ev­i­dent fail­ure to gain peo­ple’s trust.

Ex­te­rior view of the Re­gional Bank of Kur­dis­tan.

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