ILO and KfW join forces to empower Iraqi small and medium enterprises and foster inclusive growth [EN/AR] – Iraq

Attachments

Baghdad, Iraq – February 13, 2024

The International Labour Organization (ILO) and the German Ministry for Economic Cooperation and Development, through the German Development Bank (KfW), have launched a transformative partnership aimed at empowering small and medium-sized enterprises (SMEs) in Iraq.

The new “Promotion of Small and Medium-Sized Enterprises (SMEs) in Iraq program” is a collaborative endeavor that strives to unlock access to sustainable finance, placing a special emphasis on supporting youth and women entrepreneurs. The initiative contributes to fostering decent work opportunities and nurturing a prosperous future for the Iraqi economy.

Sustainable Development Goals (SDGs):

1. Goal 8: Decent Work and Economic Growth
2. Goal 5: Gender Equality

Despite Iraq’s abundant oil resources, the predominant role of the public sector, which contributes only about 30 per cent to national GDP, presents challenges to economic diversification. The nation grapples with high unemployment rates and a complex business environment. According to the World Bank’s Doing Business 2020 report, Iraq ranked 172nd out of 190 countries for ease of doing business, with major challenges such as contract negotiation, cross-border trade, and particularly accessing credit (where Iraq ranks 186th out of 190 countries).

A significant impediment lies in the limited access of many Iraqis to finance, with less than 7 per cent of GDP allocated to private sector credit. The Iraqi Company for Banking Guarantees (ICBG) plays a pivotal role in mitigating credit risks but faces obstacles in expanding access to finance for smaller businesses.

The new five-year initiative, spanning from January 2024 to December 2028, secures USD 21.5 million in funding from the German Government through KfW to markedly enhance access to finance for Iraqi SMEs, which comes in line with the priorities of the government program to support the private sector in order to create decent job opportunities, especially for youth and women. It will also work to build the capabilities of the partners in this program, including the Iraqi Company for Bank Guarantees and partner banks, as well as small and medium-sized companies that will benefit from this program.

Sustainable Development Goals (SDGs):

1. Goal 8: Decent Work and Economic Growth
2. Goal 9: Industry, Innovation and Infrastructure
3. Goal 10: Reduced Inequalities

This program signifies a crucial step towards building a more inclusive and sustainable Iraqi economy. By amplifying the voices and capabilities of SMEs, we not only create jobs but also drive innovation and propel economic growth. Partnering with KfW on this initiative will help ILO to further support the private sector to take its role in creating decent and sustainable job opportunities for youth and women. “It is a privilege for the ILO,” said Maha Katta, ILO country coordinator in Iraq.

“Small and medium enterprises are at the core of a country’s successful economic development – not only in Iraq but also in Germany. They create employment opportunities, foster growth, and contribute to economic perspectives. Together with ILO and the Iraqi Company for Credit Guarantees, we address one of the biggest obstacles for SMEs in Iraq: access to adequate financial services,” said Maximilian Rasch, Chargé d’Affaires at the German Embassy in Baghdad.

“Private sector development and particularly small and medium enterprises (SMEs) play a key role in economic growth. Yet, the limited availability of finance to SMEs in Iraq has been identified as one of the most severe obstacles for SMEs’ business to thrive. We are therefore extremely pleased to cooperate with ILO and the Iraqi Company for Credit Guarantees in providing credit guarantees to Iraqi banks so that they can expand their SME business with a special focus on supporting women and start-ups,” said Anna-Christine Janke, the Director of the KfW Office in Iraq.

From his side, Mr. Adel Akab, the President of the Iraqi Industries Union, stated, “This program is ambitious for the union, especially since it comes from the International Labour Organization and an industrial state like Germany. With the concerted efforts of all, it will play a significant role in developing these small and medium projects in Iraq.”

“The Iraqi Company for Banking Guarantees is the sole assurance institution in Iraq. However, the shortfall in financing remains a challenge for most small and medium-sized projects, leaving ample room for credit guarantee facilities in Iraq to play a significant role in addressing this challenge. We are pleased with this partnership, which will enable the company to fulfill its true role in developing small and medium projects,” said Mr. Hussein Thamer, the Acting Director of the Iraqi Company for Banking Guarantees.

“This new joint program aims not only at enhancing access to finance for SMEs, in particular those involving youth and women entrepreneurs, but also serves as a testament to the role of collaboration across various stakeholders, including the UN, the government, local communities, and international partners, in Iraq. It further underscores our commitment to creating inclusive opportunities and building a resilient, diversified, and sustainable economy that benefits every Iraqi,” said Ghulam Isaczai, the United Nations Resident Coordinator in Iraq.

Representatives from the Ministry of Planning, the Ministry of Trade, Iraqi Private Banks League, and various representatives from different partnering entities concerned with the development of the private sector attended the launch ceremony.

The “Promotion of Small and Medium-Sized Enterprises (SMEs) in Iraq” program envisions transforming the Iraqi SME credit system to foster decent work opportunities and sustainable economic development. With a target audience of 1,500 existing SMEs and startups, the program aims to benefit 1,000 SMEs through credit guarantees. Key program activities include:

• Establishing dedicated SME windows within select private financial institutions
• Implementing an effective credit guarantee scheme through ICBG
• Providing tailored technical assistance to financial institutions, ICBG, and SMEs
• Delivering targeted business management and financial literacy training programs

SDGs, Targets, and Indicators

1. SDG 8: Decent Work and Economic Growth

   • Target 8.3: Promote inclusive and sustainable economic growth, employment, and decent work for all
   • Indicator 8.3.1: Average annual growth rate of real GDP per capita
   • Indicator 8.3.2: Proportion of informal employment in non-agriculture employment, by sex

2. SDG 5: Gender Equality

   • Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life
   • Indicator 5.5.1: Proportion of seats held by women in national parliaments and local governments

3. SDG 9: Industry, Innovation, and Infrastructure

   • Target 9.3: Increase the access of small-scale industrial and other enterprises to financial services, including affordable credit, and their integration into value chains and markets
   • Indicator 9.3.1: Proportion of small-scale industries in total industry value added
   • Indicator 9.3.2: Proportion of small-scale industries with a loan or line of credit

Analysis

The issues highlighted in the article are connected to multiple Sustainable Development Goals (SDGs) and their targets. The specific SDGs, targets, and indicators that can be identified based on the article’s content are as follows:

1. SDG 8: Decent Work and Economic Growth

The article addresses the issue of high unemployment rates and the need for economic diversification in Iraq. It emphasizes the importance of empowering small and medium-sized enterprises (SMEs) to create decent work opportunities and foster economic growth.

Targets:

• Target 8.3: Promote inclusive and sustainable economic growth, employment, and decent work for all

Indicators:

• Indicator 8.3.1: Average annual growth rate of real GDP per capita
• Indicator 8.3.2: Proportion of informal employment in non-agriculture employment, by sex

2. SDG 5: Gender Equality

The article highlights the importance of supporting youth and women entrepreneurs in Iraq. It mentions that the initiative places a special emphasis on empowering women entrepreneurs, contributing to gender equality.

Targets:

• Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life

Indicators:

• Indicator 5.5.1: Proportion of seats held by women in national parliaments and local governments

3. SDG 9: Industry, Innovation, and Infrastructure

The article focuses on enhancing access to finance for Iraqi SMEs and improving the business environment. It highlights the role of small and medium-sized enterprises (SMEs) in economic growth and the need for affordable credit for their development.

Targets:

• Target 9.3: Increase the access of small-scale industrial and other enterprises to financial services, including affordable credit, and their integration into value chains and markets

Indicators:

• Indicator 9.3.1: Proportion of small-scale industries in total industry value added
• Indicator 9.3.2: Proportion of small-scale industries with a loan or line of credit

Table: SDGs, Targets, and Indicators

SDGs	Targets	Indicators
SDG 8: Decent Work and Economic Growth	Target 8.3: Promote inclusive and sustainable economic growth, employment, and decent work for all	Indicator 8.3.1: Average annual growth rate of real GDP per capita Indicator 8.3.2: Proportion of informal employment in non-agriculture employment, by sex
SDG 5: Gender Equality	Target 5.5: Ensure women’s full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic, and public life	Indicator 5.5.1: Proportion of seats held by women in national parliaments and local governments
SDG 9: Industry, Innovation, and Infrastructure	Target 9.3: Increase the access of small-scale industrial and other enterprises to financial services, including affordable credit, and their integration into value chains and markets	Indicator 9.3.1: Proportion of small-scale industries in total industry value added Indicator 9.3.2: Proportion of small-scale industries with a loan or line of credit

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Source: reliefweb.int

 

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