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Syria and Iraq: Unbanked and unstable

By Alex Warren

As most of the Middle East’s banking sectors gradually liberalize, previously difficult markets are opening up because regulators are slowly facilitating entry for newcomers.

Yet two geographically central markets with huge potential, Syria and Iraq, are still considered the domain of those willing to gamble on risky foothold strategies over the next five years. Despite political instability and sluggish economic reform, Syria is an increasingly attractive prospect. A 2003 decree allowed privately owned banks to open for business for the first time in 40 years, with a total of six now active in the almost virgin market.

“To call Syria underbanked would be an exaggeration – it is totally unbanked,” says Bassel Hamwi, deputy chairman and general manager of Bank Audi Syria, which is 49% owned by its Beirut-based parent company. “The problem now is that we have so much liquidity that we cannot find solid opportunities to invest it all, and are hampered by the public sector.”

Only 5% to 7% of the country’s deposits are currently held by private banks. The vast bulk of deposits sit in the Commercial Bank of Syria, one of the Arab world’s big banks but restricted in its development by US-imposed sanctions and an unwieldy public sector.

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