Supporting SMEs

The importance of SMEs to longer term economic stability in Iraq derives from SME's size and structure which, under adequate conditions allow them the flexibility and ability to weather adverse economic conditions. Iraq’s present environment continues to be a major challenge and ICF-SME feels this element adds the importance of strategic collaboration with its Donor partners. Based on extensive research, the SME market in Iraq is very deep and the access to capital for SMEs is woefully inadequate and not readily available to many Iraqi entrepreneurs. Targeted on-lending through established private banking institutions is an effective manner to deepen support for SME’s in Iraq whilst also ensuring consistency with program objectives.

ICF-SME’s experience has found that even in Iraq, mature SMEs are more labor intensive than larger firms and, therefore have lower capital costs associated with the creation of jobs. Consequently, SMEs will continue to play a critically important role in fostering income stability, growth and employment. In the longer run, transition economies like Iraq will operate as complex networks of firms in which a business's competitive position depends in part on the efficiency of its suppliers. Therefore, SMEs competitiveness will impact the competitive position of the economy as a whole. In addition, SMEs improve the efficiency of domestic markets and make productive use of scarce resources, such as capital, facilitating long term economic growth.

In Iraq, ICF-SME’s reputation and broad financial sector platform as a major USAID project through the Tijara program, is highly regarded. Its experience and market knowledge in bank financings is extensive; and its commitment with strong USAID support, to the development of the SME market has been further expanded through USAID funding by establishing business incubators in a number of private Iraqi banks. The incubation teams are focused on the following core operational issues all designed to further strengthen SME lending in the Iraqi private banking sector:

# Credit Policy # Portfolio Classifications # Lending Procedures
# Internal Auditing # Work Flow # MIS Reporting
# Risk Management # Product Development