Promotion of the Development of SMEs in Iraq

Project information

• Strategy

  The project helps expand SME finance in Iraq by removing collateral requirements for eligible SMEs through a 75% credit guarantee delivered by the Iraqi Company for Bank Guarantees (ICBG). This guarantee allows partner banks to lend to businesses that would normally be excluded due to high collateral demands or limited credit history. By reducing lender risk and standardizing SME lending practices, the project opens access to finance for women, youth, persons with disabilities, and other underserved groups. This helps businesses access credit, grow, and create decent jobs across the country.

  1. SME Guarantee Fund: A €21 million guarantee facility managed by the Iraqi Company for Bank Guarantees (ICBG), designed to eliminate collateral requirements and enable Participating Financial Institutions (PFIs) to lend to SMEs that would otherwise be excluded. Phase I (€9M) is operational; Phase II (€12M) will expand scale and lending capacity.
  2. SME Loan Product Development with PFIs: Co-design and rollout of a standardized SME lending product across PFIs, including a dedicated window for women, youth, persons with disabilities and start-up-led enterprises. This ensures consistent processes, risk criteria, and responsible lending standards across banks.
  3. Institutional Capacity Strengthening: Targeted advisory and training for ICBG, PFIs and SMEs covering:

  • Credit, risk, and portfolio management practices
  • ESG and compliance frameworks
  • MIS and data systems
  • Business development support for SMEs

  The three components work together to unlock finance, improve the quality of SME lending, and build a sustainable, market-based model that continues beyond the project period.

• Activities

  To meet the project objectives, the project will undertake three main activities including.

  • The establishment of a credit guarantee fund within the Iraqi Company for banking Guarantees (“ICBG”).
  • The establishment of a SME window by selected private financial institutions PFIs through their own capital fund.
  • Technical assistance to capacitate the PFIs, ICBG, as well as the SMEs.
     
• Expected Results by 2031

  By 2031, the project aims to achieve the following key results:

  • 3,000 SME loans issued by participating banks, totalling more than €100 million in SME lending by 2031.
  • Of these, 17% will go to women-led SMEs, and 300 loans will be delivered under the special window for women, youth, persons with disabilities, and start-ups.
  • Creation of 4,000 jobs, including 1,000 specifically for women. In addition to sustaining 5,000 jobs as a direct result of the project loans.
  • Selection of five participating financial institutions to participate in the guarantee fund, each maintaining a portfolio at risk of less than 5%.
• Sustainable Development Goals (SDG) Contribution

  The project directly supports four United Nations Sustainable Development Goals, with a focus on inclusive economic growth and equal access to finance.
   

  • SDG 5 – Gender Equality
  • SDG 8 – Decent Work and Economic Growth
  • SDG 9 – Industry, Innovation and Infrastructure

  • SDG 10 – Reduced Inequalities