🇮🇶 NEWS SUMMARY:
🏦 Banking Without Trust: Why Iraqis Still Keep Their Money in Cash
A new Shafaq News report highlights that Iraq’s biggest banking challenge isn’t a lack of banks or cards—it’s a lack of public trust.
💵 In April 2026, more than 104.5 trillion dinars were circulating outside banks. By May, that figure increased to 106.8 trillion, while money held inside banks declined.
📉 Bank deposits have also fallen for three consecutive months.
💳 Despite roughly 25 million active bank cards and significant progress in financial inclusion, many Iraqis still withdraw their salaries and prefer to hold cash.
🔎 ANALYSIS:
The most important question isn’t simply how much cash exists, but why Iraqis prefer keeping their money outside the banking system.
🤝 Trust will be critical to any
major economic transformation. Iraq needs stronger banks, better services, deposit protection, simpler procedures, and reliable access to funds.
🏛️ The government is pursuing banking reforms, digitalization, and potential mergers involving state-owned banks.
📈 If these reforms restore confidence and bring more dinars back into the banking system, Iraq could significantly strengthen lending, investment, and financial intermediation.
⚠️ IMPORTANT: This report does NOT announce a new exchange rate or an RV. It also does not confirm the removal of the three zeros.
👀 However, it highlights something important: banking modernization remains a key piece of Iraq’s broader economic transformation.
🇮🇶 The real challenge now is turning banking access into trust, deposits, and genuine participation in the financial system.
🙏 Faith. Patience. Preparation.
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Banking without trust: Why Iraqis still keep their money in cash
2026-09-10 05:19
Shafaq News
Iraq does not have a shortage of banks, payment cards, or reform plans. What its financial system lacks is the one thing that would make any of them work: public confidence that money deposited today can be withdrawn tomorrow. Until Iraqi banks earn that trust, cash will keep its advantage, and the figures show it is winning by a widening margin.
Central Bank of Iraq (CBI) data put currency circulating outside banks at 104.542 trillion dinars ($79.45 billion) at the end of April 2026, against just 8.354 trillion dinars ($6.35 billion) held inside them. By May, the imbalance had grown, with cash outside banks climbing to 106.812 trillion dinars ($81.18 billion) as bank holdings slipped to 6.748 trillion dinars ($5.13 billion). Money is not merely sitting in the system's margins; it is draining away from its center.
Mahmoud Dagher, a financial expert and former CBI director general, cautioned against reading all of it as hoarded savings. Of roughly 105 trillion dinars in issued currency, he told Shafaq News, about eight trillion sat in banks and 97 trillion circulated elsewhere, but around two-thirds of that finances everyday transactions, property purchases, salaries, and wages, with perhaps a quarter held as stored savings. His point sharpens rather than softens the problem: Iraqis are not simply saving in cash; they are running an entire economy through it, and they do so because they distrust the alternative. After all, payment habits are entrenched, and electronic options remain slow to take hold.
Read more: Exchange offices in Iraq: Cash economy outpaces banking sector
The cost of that arrangement falls on the wider economy. Mudhir Mohammed Saleh, financial adviser to the prime minister, warned that money outside formal channels starves banks of the resources they need to lend. Cash held by households and businesses outside the financial system, he told Shafaq News, reduces what is available for intermediation while reinforcing informal activity and raising the cost of transactions. “Drawing those funds in will take competitive returns, stronger protections, simpler procedures, and dependable access to deposits, and even then the work is not done.”
The goal, Saleh stressed, is to channel the money into investment, production, and employment.
The banks, however, are moving in the wrong direction. CBI figures show deposits falling for a third straight month, from 105.090 trillion dinars in March to 104.727 trillion in April and 104.296 trillion by the end of May. Cash credit declined over the same period, from 73.832 trillion to 73.173 trillion dinars. The retreat is not for want of institutions: the Eco Iraq Observatory counted 81 banks and representative offices in July: eight state-owned, 24 local commercial, 31 local Islamic, 16 foreign, and two foreign representative offices.
Najm Abdul Tarish, an economic expert and professor at the University of Dhi Qar, argued that cash itself is not the issue; its dominance over both transactions and savings is, because it sidelines financial institutions from the wider economy. He traced that dominance to the same cluster of causes: distrust, ingrained payment habits, the informal economy, and thin electronic uptake.
In March, an economic source told Shafaq News that major state lenders, including state-run Rafidain and Rasheed banks, faced acute liquidity shortages that forced some clients to come back later or accept only part of what they had requested. When retrieving a large sum can take days, holding banknotes feels more dependable than any account: theft, loss, and depreciation notwithstanding.
Progress on payments has not closed the gap. Iraq has made measurable gains in electronic transactions: the Eco Iraq Observatory put active bank cards at around 25 million in July, and earlier government figures showed financial inclusion rising from under 10 percent in 2019 to roughly 40 percent. Yet access does not equal deposits. Salary earners often withdraw their wages the moment they land, merchants accept cards while still preferring cash, and households open accounts they never use for long-term saving. More cards, in short, have not meant less cash.
Read more: Cash culture dominates Iraq, reform efforts stall
Iraq's dependence on oil compounds the strain. Petroleum supplies at least 80 percent of state revenue, which ties the banking system to the swings of government finance. When oil income falls, Baghdad relies more heavily on domestic banks.
In August, senior Finance Ministry officials and a source close to Prime Minister Ali Al-Zaidi told Shafaq News that the government was preparing to borrow more than three trillion dinars from local private banks to cover public-sector salaries after petroleum revenue dropped sharply. For depositors, a system with a narrow deposit base must absorb private-sector demand and bursts of state borrowing at once. That does not by itself delay withdrawals, but it deepens the structural pressure and underscores why stable deposits matter.
Baghdad is pursuing changes to governance, state-bank structure, and digital infrastructure: the Finance Ministry plans to merge Rafidain with Rasheed and the Cooperative Agricultural Bank with the Industrial Bank, and the government is weighing leadership changes at state lenders faulted for poor service and slow modernization. Cards, mergers, and new regulations can widen access. None of them can manufacture reliability.
Until Iraqis feel secure enough to trust banks with their money —confident that a deposit made today can be withdrawn in full tomorrow— cash will keep its advantage, and every reform will run up against the trust it has yet to earn.
https://shafaq.com/en/Report/Banking-without-trust-Why-Iraqis-still-keep-their-money-in-cash