Microfinance based on internationally accepted standards of best practice started in Iraq in 2003. It was set up primarily as a tool to help Iraqis rebuild homes and small businesses damaged by terrorist violence. Microfinance now serves as the sole provider of inclusive sustainable financial services for micro, small and medium-scale enterprises (MSMEs), the poor and those excluded from the financial industry due to weak banking infrastructure and high collateral requirements. Microfinance institutions (MFIs) such as CHF International, the ACDI/VOCA-supported Al-Thiqa Small Business Loan Fund and Relief International (RI) established operations in Iraq in 2003, 2004 and 2006, respectively through funding received from the U.S. Government. Their operations, however, were limited to areas of Iraq less affected by violence in the south and center, and Northern Iraq’s semi-autonomous Kurdistan region.

USAID-Izdihar, a private sector growth and employment generation program funded by USAID from 2004 to 2008, assisted America’s coalition allies in late 2006 to establish indigenous MFIs in order to ensure the presence of at least one MFI in each province to enable private sector growth. Today, there are 14 MFIs serving all 18 provinces.

Since 2008, USAID-Tijara has redoubled the effort to implement initiatives at the macro, meso and micro levels to build an inclusive financial industry in Iraq. Taking the lead in donor coordination and creating stakeholder platforms for engaging with the Iraqi microfinance industry, USAID-Tijara has been at the forefront of championing transparency, accountability and technology-based solutions for expanding and deepening outreach to the poor and women. These improvements support the mainstreaming of inclusive financial services based on internationally-accepted best practice standards.

The USAID-Tijara Microfinance team (microfinance@tijara-iraq.com) assists indigenous and international microfinance institutions which operate in all 18 provinces of Iraq. The assistance includes evaluation, training, business planning and helping find investors and donors.

To read more about USAID’s work in leading the Iraqi microfinance industry development approach, please download the State of Iraq’s Microfinance Industry 2010.