The Remittance Trail to Iraq

The Remittance Trail to Iraq

Kenny Zair, Director of SFS Amman is doing something many would think impossible. His company, SFS Amman operates in the Iraqi remittance market and he is extremely bullish about its growth potential.

“The situation in Iraq is vastly different from what you hear in the media. While there are small pockets that are turbulent in Iraq, there are also 28 million people living normal lives. Irbil, the capital of the Kurdistan region, is today being called the new Dubai, because of the amount of ongoing construction and business. There are two million people who have left Iraq as refugees into neighbouring countries and they are in need of remittance services. SFS Amman entered the market in 2003 and in 2006, we convinced the Iraq Central Bank to issue us the first money transfer license.

“Iraq is a 90% cash society; there is no debit or credit. Most people do not have bank accounts. They do not understand ATM or point of sale machines. A number of overseas companies have contacted us to try to enter Iraq to market their product. There is massive growth happening in Iraq right now: in 2003, there was no mobile service and today there are 4 million subscribers all over Iraq. From 2004 to 2006, Iraq imported one million cars; in the last two years, 750,000 passports were issued and one million travellers are expected to go in and out of the country this year. The number of fi-nancial transactions is roughly 250,000 monthly and that number is expected to quadruple in the next two years. Domestic transfer does not exist and never has existed. We have opened 15 loca-tions to send money between the different Iraqi states. The people typically use cash and informal, family-network systems similar to hawala. For international transfers, they have some licensed exchange houses. When we entered Iraq, there was almost no banking system.”

On SFS Amman's initiatives in the country, Zair says, “We have installed our first 30 point of sale machines last month and plan 700-1000 machines in 2008. There are only about 30 ATMs in the country and we plan to install and process 200 ATMs. SFS has issued credit cards and internet cards. There are also about 200,000 foreign employees, coming into the construction and services sectors from Philippines, Bangladesh, India, etc. The money flows are both ways, inwards and outwards but a larger chunk of the business flows are outwards. Banking is not well-developed in Iraq and there are 37 private Iraqi banks along with 40-50 international banks but the latter are entering the market by buying stakes in the Iraqi banks. About half the Iraqi banks have core banking systems, whereas the other half are still too small to have core banking systems. These banks are still working with papers and pencils, which makes money transfers even between branches quite difficult. This creates a market need for our services to transfer money between states, even for the same account.

“The flows are going from Iraq predominantly into China, US, Dubai, Jordan, and Syria, and being used especially for trade. There is no Automated Clearing House (ACH) system in Iraq currently, so an international bank transfer can still take four or five days to clear. Sometimes there are complicated requirements before you can pick up your money, so a large percentage of people rely on reputed cash exchangers. Trade Bank of Iraq (TBI), a newly developmental bank, has the biggest segment of B2B business wire it conjunction with Chase Bank.”

Zair talks about the current state of competition in the Iraqi market, saying, “Western Union came in last year but has only four or five sites placed in banks. MoneyGram has just entered the country and also chosen to place itself within banks and exchange houses, but an average Iraqi does not know what a Western Union or MoneyGram is nor is he likely to have access to them. Security concerns have possibly kept many companies away.”

While it is clear that Zair does not believe there is physical danger in the Iraqi market, but possibly anti-money laundering (AML) practices are still too distant a concept for this newly emerged market. Zair encapsulates his ideas by saying, “In the financial business, there is a tremendous opportunity in Iraq, and SFS would welcome partners. Unistream is a company that has grown tremendously in a market in some ways similar to Iraq (Russia). I admire them greatly and would like to emulate their success in Iraq.”