A farmer outside of Erbil prepares tomatoes to sell at the market. Photo: Mohammed Shwani/Rudaw
ERBIL, Kurdistan Region – Kurdish farmers will soon be able to access Iraqi loans if plans to open federal bank branches go ahead.
Baghdad has plans to open branches of its agriculture, industry, and trade banks in the Kurdistan Region, according to an official from the Iraqi Central Bank. Through these branches, Kurdish farmers should then be able to access government loans earmarked for the country’s beleaguered agriculture industry.
In 2015, the Iraqi Central Bank lent six trillion dinars ($5 billion) to these banks to be shared out in small loans in order to develop the country’s economy. Of this, the agriculture bank received 1.66 trillion dinars ($1.4 billion) for farmers.
But farmers in the Kurdistan Region have not been able to benefit from these loans because the agriculture bank doesn’t have branches in the autonomous region.
Kurdish farmers protested the inaccessibility of the loans.
Faris Hasan, head of Sardam Farmers Organization for the Development of Agriculture, wrote to the Iraqi bank of agriculture in August 2018. The bank responded saying they are prepared to open branches in the Kurdistan Region and give loans to farmers if the KRG ministry of finance cooperates with them in terms of providing locations and employees.
Erbil and Baghdad agreed for more Central Bank oversight over the Kurdistan Region’s banking sector as part of renewing relations after the fall out of the vote for independence.
And now, “the Iraqi government intends to open bank branches of agriculture, industry, and trade in the Kurdistan Region, just like its branch of the central bank,” said Abid Saleh Mohammed, general manager of the Erbil branch of the Iraqi Central Bank.
“In the future, these bank branches in the Kurdistan Region will be run by Baghdad, or new such branches will open here so that the people of the Region benefit from these loans,” he added.
In addition to reaching an agreement to open the banks, Mohammed said Erbil and Baghdad also need to set instructions for how the loans will be repaid.
“These banks will not give loans if they are not sure these loans will be repaid,” he added.
A former Iraqi MP, Najiba Najib, said that Baghdad is serious about this, but that the Kurdistan Region is dragging its feet.
The KRG’s finance ministry denied anything official is in the works.
“We are aware of the letter sent by the Iraqi agriculture bank to Sardam Farmers Organization, but haven’t received any official letters from the Iraqi ministry of finance about opening branches of agriculture and industry banks,” a source from the ministry told Rudaw.
The KRG itself used to offer loans to farmers.
Between 2009 and 2013, nearly 180 billion dinars ($151.4 million) were loaned out, funding 6,825 agricultural projects.
The government suspended the program when the financial crisis hit.
This year, the KRG asked farmers to start repaying the loans. Farmers are afraid they will be hit with interest charges for the three-year freeze on their loan repayments.
A source from the ministry of finance said that won’t happen: “No extra money will be taken from farmers… providing they had paid back their loans in the past years in accordance with the given instructions.”
The Kurdistan Region has a long tradition of farming and Erbil has promoted agriculture in order to diversify the economy. Farmers face many challenges, however, including water shortages, competition from imports, fluctuating prices, and stiff tariffs on their exports.