ILO, the German Embassy and Iraqi Partners Launch a guarantee fund to empower SMEs and boost inclusive growth in Iraq

BAGHDAD (ILO News) - The International Labour Organization (ILO), in partnership with the Ministry of Labour and Social Affairs (MoLSA) and with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ) through the German Development Bank (KfW), has launched the Credit Guarantee Fund to empower small and medium enterprises (SMEs) in Iraq.

The launch of the Fund represents a major milestone within the ILO project Enhancing and Developing Small and Medium Enterprises in Iraq, which forms part of the ILO’s broader efforts to promote decent work, strengthen the private sector and support inclusive growth and social justice in Iraq.

After years of instability, many SMEs in Iraq continue to face challenges in accessing finance, with collateral requirements often exceeding 100 per cent of loan values. The Fund, managed by the Iraqi Company for Bank Guarantees (ICBG), aims to address these challenges by encouraging banks to expand lending to SMEs—particularly those led by women and youth.

The launch event, held under the title “A New Page for Decent Work: Launch of the Credit Guarantee Fund to Empower Small and Medium Enterprises”, brought together high-level representatives from the Government of Iraq, the ILO, and development partners.

© ILO Iraq / Raghda Muhi

© ILO Iraq / Raghda Muhi

In his opening remarks, Mr. Ahmed Al-Assady, Minister of Labour and Social Affairs in Iraq, said:

"At the Ministry of Labour and Social Affairs, we highly value the significant role played by the ILO in supporting institutional capacity-building and developing programmes aimed at creating productive and sustainable employment opportunities, in line with the Government of Iraq’s priorities to empower vulnerable groups and promote social justice."

The event also featured a recorded message from Dr. Ruba Jaradat, ILO Regional Director for the Arab States, who highlighted the importance of the Fund as a concrete step toward inclusive finance and job creation, reaffirming the Organization’s long-standing commitment to supporting the resilience of the Iraqi economy and advancing the Decent Work Agenda.

Maha Kattaa, Chief Technical Advisor for the Partnership for improving prospects for forcibly displaced persons and host communities (PROSPECTS) programme in the Arab States Region, added:

"This Fund represents a genuine determination to empower small and medium enterprises in Iraq to create decent jobs and achieve inclusive growth."

The ceremony also included remarks by Mr. Amjad Fouad, Chairman of the Iraqi Company for Bank Guarantees (ICBG), Mr. Marc André Hensel, KfW Country Director and a representative of the German Embassy in Iraq, who stated:

"Today we begin a new chapter in this journey. We look forward to working with all partners to ensure the Fund’s growth, deliver tangible results, and strengthen Iraq’s economic foundations."

© ILO Iraq / Raghda Muhi

© ILO Iraq / Raghda Muhi

The event concluded with the official signing of partnership agreements between the ICBG and four participating financial institutions: the Iraqi National Bank, Bank of Baghdad, Al-Mashriq Al-Arabi Islamic Investment Bank, and Al-Aoula Company for Finance.

Bank of Baghdad, National Bank of Iraq, Al Meshreq Al Arabi Islamic Bank, First Finance Microfinance Company

With an additional contribution of EUR 20 million from BMZ through KfW, the total size of the Fund now reaches EUR 40 million, enabling up to EUR 100 million in loans to SMEs in the private sector.

By 2031, the Fund is expected to:

• Provide 3,000 loans worth a total of EUR 100 million, with 25% allocated to women-led enterprises.
• Create 4,000 new jobs and sustain 5,000 existing jobs, including 400 jobs for women.
• Strengthen the capacity of the ICBG and participating financial institutions to sustainably support SMEs; and

Deliver entrepreneurship and financial literacy training through the Start and Improve Your Business (SIYB) and Financial Education programmes to around 3,000 SMEs, helping them grow and manage their businesses effectively.