Iraq’s money and the microcreditors

October 19, 2005 at 6:05 am Leave a comment

It occured to me once to see if Iraq had proper banking after the fall of Hussein. It does, in fact the infiltration of banking into Iraq happened in record time (some several years faster than in Europe after WWII). But one small problem remains, while more than enough money was printed to exchange every bill in Iraq for the newer post-Hussein bills, they only got 1/3 of the printed money. 1/3 ain’t bad when it’s several billion your exchanging in paper bills, but that still means 60% of the money in Iraq isn’t legitimate. As The Economist put it,“This would seem to be a suitable case for foreign investment to bring in the needed know-how and technology. “ As The Economist points out most Iraq people typically haven’t used modern banking system, under Hussein the banks suffered from control and bad book keeping. The emphaisis is on getting loans out there as fast as possible. While microcredit is obviouslly a good way to get loans out there fast it also has the advantage of providing a good way for Iraq people to exchange their old bills for new ones. Deposited and verified money would be replaced with the new dinar which is already rising in value. Additionally, Brazil’s microcredit program is a good example of how to set-up a bank with out having to make tellers or new banks all over the place. The system lets people start a bank account with just cash, no credit check, and allows you to deposit money at post offices and authorized retailers. I.E. the corner market becomes an ATM and a grocery store. Additionally the banking spots could collect applications for grameen loans. This would give the U.S. a good way to exchange out the old dinar for the new one, allow Iraq’s residents to begin saving, help facilitate small time loans, and additionally provide merchants with an added way of making revenue. I also was thinking it would be nice to put a small cell phone buried into the bank box that automatically sends text messages in regularly to make sure the box hasn’t been stolen. You could also try rfid similar to lo-jack’s car installation so that the decentralized banking system could be secure (well at least 80% of the time). Finally, with the saving you could issue atm cards and then begin to modernize the system with actual electronic banking and all that. I think if we’re ever going to leave Iraq it’s going to be when we can truly offer them a place better than what they had before. Getting them up to spead on essential services like banking is obviously a good start. While progress has been made, I haven’t heard of a system that really takes advantages of modern day methods of banking. While Brazil is leading the way in services for the poor (their even investing in alternative energy solutions for folks off the grid), it seems like many of the services currently being offered are based on assumptions of American behavoir instead of middle eastern. I might be wrong though and their already is widely available banking in Iraq.

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