ROBERT SIEGEL, host:
We're going to move on to another of the many challenges facing Iraq now. The country's central bank is in the middle of the most significant modernization in its history. If all goes according to plan, the country will soon move from an almost entirely cash-based economy to one with most of the features of the modern financial system.
As NPR's Adam Davidson reports, this is seen as a crucial step for Iraq's economy because without a better banking system, major development projects are more difficult.
ADAM DAVIDSON reporting:
It is hard as an American to imagine how difficult it is to run a business in Iraq these days. Consider Mertasa Mussia-Jassan(ph); he's actually doing quite well by Iraqi standards. He's a prominent businessman.
Mr. MERTASA MUSSIA-JASSAN (Iraqi Businessman): (Speaking foreign language)
DAVIDSON: I have factories that make asphalt, gravel and concrete, he says. He's won some big contracts to build roads on U.S. Army bases and he sells construction materials to Iraqi businesses, so he's making money, but he can't get anywhere on his most ambitious projects. I have a project to open a hotel, he says, five stars, in Baghdad. It's easy to assume his biggest problem is security. But it's not. It's the banks.
Mr. MUSSIA-JASSAN: (Speaking foreign language)
DAVIDSON: I went to the Iraqi banks and nobody can help me, he says.
Iraqi banks offer almost no loans, so Jassan, like all Iraqi business people, is limited to projects that he can directly pay for himself from cash he has on hand.
Mr. MUSSIA-JASSAN: (Speaking foreign language)
DAVIDSON: The banks are the major issue right now, he says. Bad banks are the reason Iraq's economy has frozen.
Iraq has never followed Islamic rules against interest, the banks were actually up to modern standards through the 1950s, but successive Socialist governments and Saddam Hussein's corrupt regime destroyed the banking system. Iraqi banks are grim places, says Kevin Tacker, the Chief U.S. Treasury Official in Iraq. They have a vault and they have teller windows, but they don't have anything else that Americans would expect to see.
Mr. KEVIN TACKER (Chief Official in Iraq, U.S. Treasury): There is no loan desk in the corner, there is no ATM machine anywhere in sight. There are none of the bright brochures that are offering all of the different kinds of banking services and investment services that we're familiar with.
Mr. JADI BAH-RANI (ph) (Banking Entrepreneur): An Iraqi bank is basically just would be taking cash, giving it to someone and says please hide it for me, I'll be back.
DAVIDSON: Jadi Bah-Rani is working to create one of Iraq's first modern banks. He's already raised more than $20 million, mostly from wealthy Iraqis. He hopes to open this year and offer all sorts of things Iraq has never seen: credit and debit cards, mortgage loans, insurance.
Bah-Rani isn't alone. By the end of the year, there could be more then two dozen banks. Some with foreign partners, some entirely Iraqi-owned, offering modern services; but no bank can do much until the central bank modernizes. Treasury's Tacker says Iraq is still a cash-only economy.
Mr. TACKER: Every month in Iraq the central bank and the main state owned banks are moving 20 tons of currency around the country just so government workers can get paid.
DAVIDSON: In Iraq, the only way to move money from one place to another is to physically move cash and all that cash moving around is dangerous, Tacker says.
Mr. TACKER: Could you imagine what it would be like in the United States if everybody knew that on every payday, whoever was walking down the street was walking with hundreds or thousands of dollars in their pockets. You know what that would do to personal security?
DAVIDSON: Within weeks, if all goes well, the U.S. government will pay for the final stages of a modern payment system. One that will, for the first time, allow Iraqi banks to move money electronically. That will free Iraq's private banks to begin offering modern services. Bah-Rani says that eventually Iraq's people and businesses will eagerly take to new banking services. Banks, he thinks, will make a lot of money.
Mr. BAH-RANI: Someday it will happen. The question is when. I don't think any of us now today can say when.
DAVIDSON: But, Bah-Rani says, he's sure it won't happen until there is a lot less violence and a lot more stability.
Adam Davidson, NPR News.
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