A crop of small privately owned banks established in the 1990s is emerging in Iraq.

Business is apparently booming for at least one of these banks, Warka Investment Bank, which last year wrote a significant amount of letter of credit (L/C) business.

Share hike

The value of shares in Warka, which is controlled by businessman Saad Buniya, have soared 287 per cent in less than a couple of months.

This is partly due to a recent split in the bank's capital base that resulted in shareholders receiving 3.8 shares for free for each share they owned.

L/C ban

After the 1991 Gulf War, Saddam Hussein authorised for the first time the formation of private banks in Iraq.

During the 1990s 17 such banks were established, but until the US-led occupation of Iraq, these banks were prohibited from conducting international transactions - including L/Cs and overseas remittances.

L/C revenue

Now financial analysts say Warka's major sources of revenue in 2004 were L/Cs and cross-border transfers.

Small private Iraqi banks are expected to grow even more sharply if the monopoly of the state banks over lucrative government related business is reduced.

Market driven

Now, as Iraq develops a market-driven banking system, restrictions on private banks such as the ban on L/Cs are being reduced and the importance of Iraq's private banks is expected to grow significantly.

Apart from Warka, other banks established in the 1990s include Babylon Bank, Bank of Baghdad, Commercial Bank of Iraq, Credit Bank of Iraq, Dar Es Salaam Investment Bank, Gulf Commercial Bank, Investment Bank of Iraq and Iraqi Middle East Investment Bank.

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