Turkish companies say they are writing an increasing amount of business with customers in northern Iraq.

Now they say they want Turkish banks to move into the area to provide trade finance arrangements, including letters of credit (L/Cs).

Current operations

Around 200 Turkish companies are currently operating in northern Iraq, and according to the daily Zaman newspaper, these companies are exporting around US$2 billion worth of goods a year to the area.

But the companies have told the newspaper they are experiencing problems obtaining L/Cs, as well as letters of guarantee and money transfer services, and they want Turkish banks to open up in the region as soon as possible.

Informal banking

Many financial transactions between Turkish and Iraqi companies that would normally be undertaken by banks are currently conducted informally and based on trust with jewellery dealers and at exchange offices in Erbil, Dohuk, Suleymania, and Kirkuk, according to the paper.

While this informal system appears to suffice for smaller transactions, the companies appear to be unhappy with this kind of arrangement in larger, riskier transactions.

More trade finance

Traders are therefore calling for more trade finance provision for cross-border transactions between the two countries. The Turkish daily says Akbank and Vakifbank have started talks with the Iraqi authorities with a view to establishing a physical presence in the neighbouring country.

Ziraat Bank already paved the way for other Turkish banks when it obtained the first permission for a Turkey-based bank to operate in Iraq last year. So far it has not been able to begin operations because it is a public bank and for security reasons according to Zaman.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.