New microfinance institution provides credit to small Iraqi businesses

Sep 2006
Iraq , September, 11 2006 - A few months ago, a terrorist incident in Kirkuk destroyed most of the stock of a local pharmacy, leaving a family-owned business in tatters. The pharmacy will soon be fully restored: in mid-July the family took out a loan – $3,000 in Iraqi dinars – to replenish the stock and rebuild the business. The loan was the first made by Al-Aman, a new, indigenous microfinance organization established through a successful partnership between the USAID-funded Izdihar project, the U.S. military (MNC-I C9) and the Provisional Reconstruction Team (PRT) of Kirkuk.

Al-Aman's customers will be small business owners from Kirkuk and the neighboring area who need small amounts of money to finance their operating expenses or purchase new equipment, and who normally have difficulties. The banks require real estate as collateral, whereas Al-Aman is the first Iraqi microfinance institution that gives loans based on cash flow.

Through Izdihar, a project for developing the private sector in Iraq, USAID provided a $250,000 grant to form the initial loan capital for Al-Aman and provide training for its staff. The loans - in the range of $2,000 to $5,000 - will target women entrepreneurs, and are expected to create several hundred new jobs.

In the first week of operation, the staff of Al-Aman interviewed 13 applicants, approved three loans (one for a business owned by a woman) and closed two of them, which may generate up to nine jobs.

Al-Aman will serve as a model for two similar microfinance institutions located in Baghdad and Falluja that will start operating soon, and may inspire the banking sector to gradually move towards cash flow lending.

Source : Portaliraq

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