Shafaq News – Baghdad

Iraq’s 2025 banking figures reveal stark disparities in loan-to-deposit ratios* (LDRs) across the sector, with some small lenders issuing credit at several times the value of their deposits, economist Manar al-Obaidi said on Saturday.

In a statement, al-Obaidi grouped banks into three categories: Large lenders—with assets above 1T dinars ($715M)—maintain an average LDR of 46%, a level he described as safe and in line with global norms. Mid-sized institutions, holding between 500B dinars ($357M) and less than 1T dinars, post a much higher ratio of about 109%.

At the extreme end, some small banks report LDRs of 400%—loans quadruple their deposits. One lender held just 2.2B dinars ($1.57M) in deposits against a loan book of 440B dinars ($314.5M). Another had 3B dinars ($2.14M) in deposits but extended over 136B dinars ($97.2M) in credit.

A significant share of this lending stems from the Central Bank of Iraq’s subsidized financing scheme for small and medium enterprises, launched in 2015. The initiative, which has disbursed 13.5T dinars ($9.65B) to date, channels low-cost credit through participating banks to stimulate economic activity.

Al-Obaidi questioned whether certain small lenders possess the capacity to manage such large portfolios responsibly, and whether the program is delivering its intended economic benefits. "There must be a review of lending practices, reclassification of banks based on deposit levels, clientele, and service quality, and stronger backing for well-governed institutions."

“The key question today,” he added, “is who truly benefits from these loans.”

* LDR is a banking metric showing how much a bank has loaned out compared to how much it holds in deposits.