BAGHDAD--The Founding Shareholders meeting of the Iraqi Company for Financing SMEs, Ltd. (ICF-Small and Medium Enterprises) convened on June 6 at the Baghdad headquarters of the Tijara Provincial Economic Growth Program. Managing Directors of ICF-SME's nine Iraqi private commercial shareholder banks attended. They confirmed the appointment of Sherwan Mustafa to be ICF-SME's new Managing Director and reviewed the first-year business plan.

Incorporated last month, ICF-SME is designed to funnel investment capital to Iraqi banks for on-lending to small and medium enterprises to stimulate private sector growth. About 700,000 formal sector SMEs already exist in Iraq. Each employs from three to 29 workers. ICF-SME shareholders anticipate that a guaranteed flow of loan capital will allow existing small-and medium-size enterprises to expand and new ones to be created.

The Tijara program supported by the United States Agency for International Development (USAID) will provide a grant of $6,000,000 to ICF-SME for on lending through its shareholder banks that have specialized SME Lending Units. The money will be used for SME loans extended to qualified business borrowers at about 10 percent interest, and will average about 35 percent below prevailing market rates.

"Many worthy business people simply can't pay 16 to 18 percent interest, but they can afford 10 percent interest," says ICF-SME managing director Sherwan Mustafa. "We hope an established funding source will create more competition and allow interest rates to fall even further."

The founding private commercial banks that will receive the initial loan capital allocations are Gulf Bank, Sumer Bank, Ashur Bank, North Bank, Middle East Bank, Baghdad Bank, National Bank, Mosul Bank and Basra Bank.

The USAID-Tijara Provincial Economic Growth Program, which helped establish ICF-SME, promotes private sector development and employment in Iraq by supporting sustainable microfinance, bank lending for small and medium size enterprises, business development services, investment promotion, trade policy reform and accession to the World Trade Organization. USAID-Tijara works with government entities, Iraqi business associations and local leaders to create synergies that will improve the business environment, expand the private sector and advance other mutually-shared goals.

Since 2003, USAID has invested more than $6 billion on programs designed to stabilize communities; foster economic and agricultural growth; and build the capacity of the national, local, and provincial governments to respond to the needs of the Iraqi people.