Home Resilience Iraq puts focus on education system in digital payments push

Iraq puts focus on education system in digital payments push

Iraq: the push towards digital payments will focus on schools and universities | Credit: David Mark; Pixabay

Iraq’s central bank is to target the country’s education sector as it looks to promote the use of digital payments.

The Central Bank of Iraq is working alongside Mastercard as it looks to steer the country away from cash and boost financial inclusion.

The partnership, announced by the US-headquartered company, is described as a ‘starting point that will allow for the development of a full digital ecosystem’ in Iraq to include wholesale modernisation of payments infrastructure. Aims include digitising government payments (in and out), as well as payments across the private sector.

Most payments in Iraq’s education sector are currently made in cash, which reflects the country’s largely cash-based economy.

The education sector drive will focus on schools and universities, seeking to digitise payments for items such as as textbooks and other day-to-day expenses, for example cafeteria use, as well as, where appropriate, tuition fees. The aim is to ‘minimise sizeable operational and administrative inefficiencies’ across education by reducing cash use and reliance on ‘overly manual’ processes.

‘It is critical to encourage a change in the way consumers pay school fees, since it can cause a ripple effect by impacting the entire payment ecosystem and economy,’ notes Mastercard in its press release.

Aiming to expand into other sectors

“Creating a digital payment ecosystem is critical, not only because it encourages economic development, but because there is also a demonstrable, negative relationship between cash use and the shadow economy,” said Mastercard’s division president for the Middle East and North Africa (MENA) Khalid Elgibali.

“Our work with the Central Bank of Iraq will focus on improving overall efficiencies the economy, starting with the educational institutions by giving parents, students, and merchants a much safer, simpler, and more convenient way to pay,” he continued. “This is only the start however, and we look forward to expanding into other sectors at a later stage, as we work to advance the full payment ecosystem and achieve financial inclusion in Iraq.”

Mastercard and the central bank first announced a memorandum of understanding, focused on financial inclusion, in 2018. More than five million Mastercard cards have since been issued in Iraq, according to the company.

The central bank’s payments department director-general, Duha Abdul Kareem Mohammed, said: “The work that Mastercard has done in Iraq has made a notable impact on the country’s financial services sector and driven greater levels of financial inclusion. We clearly recognise that the digital economy has a vital role to play in that journey, especially in enabling formal economic growth through a new payment ecosystem that is transparent, simple and effective.”

‘Decades-old serious challenges’

Oil-price volatility and Covid-19 both amplified Iraq’s economic woes over the past year, reversing two years of steady recovery, according to the World Bank. The country, which has a population of about 40 million, saw a GDP contraction of 10.4% during 2020.

The government adopted a white paper for economic reform in October 2020 that was prepared by the country’s Crisis Cell for Financial and Fiscal Reform, which was set up five months previously.

The white paper, an attempt to address ‘accumulated, decades-old serious challenges’, outlines problems ranging from the weakness of financial institutions, absence of ‘modern coherent systems’ for managing state revenues, an ‘ineffective and outdated’ banking sector, ‘complex and antiquated’ government procedures through to destruction of infrastructure and the costs of war against terrorists.

It cites plans to introduce an e-governance system for government contracts, as well as tax and customs collection; and to bring in e-signature and transactions throughout the public administration, phasing out paper transactions.

‘The ultimate success of these reforms – which are transformative in nature – depends on political will and public support for leading the country out of its fragility trap,’ according to the World Bank. ‘Popular perceptions of corruption, as well as Iraq’s weak public service delivery could give rise to more social tensions and undermine their implementation. The key challenge for Iraq will be to move ahead with its white paper reforms amid recovery in international oil markets, and to maintain a sustainable macroeconomic framework,’ it says.

The government kicked off implementation a couple of months ago, with PM Mustafa Al-Kadhimi urging e-governance adoption during a committee meeting.