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Cablegate: Prt Salah Ad Din: Micro-Finance Program Stalled

VZCZCXRO0762
RR RUEHBC RUEHDA RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #2772/01 2411437
ZNR UUUUU ZZH
R 281437Z AUG 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC 9106
INFO RUCNRAQ/IRAQ COLLECTIVE

UNCLAS SECTION 01 OF 02 BAGHDAD 002772

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: EFIN ECON PGOV EAID IZ
SUBJECT: PRT SALAH AD DIN: MICRO-FINANCE PROGRAM STALLED
BY LACK OF ADMIN FUNDING

Sensitive but unclassified - please protect accordingly.

1. (U) This is a PRT Salah ad Din reporting cable.

2. (SBU) Summary: On 11 August, the PRT met with the Director
General of the Ministry of Labor and Social Affairs (MOLSA)
loan program for Salah ad Din (SaD) to gauge the status of
the MOLSA credit program in the province. The MOLSA loans in
SaD show promising signs to successfully support
entrepreneurship, but only 6 percent of the allocated program
funding was disbursed due to the GoI,s failure to allocate
any administrative funding for the program. End Summary.

3. (SBU) On 11 August, the PRT met with Ms. Veyan Ibrahim
Bakhish, the Director General of the MOLSA loan program for
SaD, to gauge the status of the loan application, processing
and disbursal process for the MOLSA credit program.
Additional areas of inquiry included identification of the
future direction and areas of emphasis of the MOLSA credit
facility. Veyan reported that 1,832 loan applications were
jointly approved by her Tikrit Office and the Central Office
in Baghdad. Of these applications, 657 have been fully
disbursed on. 1,441 applications are still awaiting final
approval from the Central MOLSA Office in Baghdad. The
current monthly disbursal rate on approved applications is
between 100 and 300 while the average loan size is 3,000
dollars.

4. (SBU) These raw statistics suggest that when all
already-approved and to-be-approved (1,832 plus 1,441)
applications are funded, roughly 9,819,000 dollars of loan
capital will have been disbursed. This prospective and
maximum disbursal sum is substantially less than the 35
million dollars which was designated as loan capital for SaD
within the MOLSA framework. Similarly, this raw statistical
data, when combined with the plausible assumption that 200
loans are funded each month, suggest that it could take
another 13 months to fund the remaining outstanding
applications. The inability to deploy no more than 28
percent of SaD,s assigned loan capital in an expeditious
manner is attributable to the fact that the GoI has not
allocated the incremental monies necessary to pay for the
increased staffing requirements and office equipment needs
that new credit initiatives require if they are to be
efficiently and expeditiously implemented.

5. (SBU) Going forward, Veyan notes that there is a
forthcoming new MOLSA program which, once again, is designed
to deploy 35 million dollars of loan proceeds in SaD.
Overlaying this new loan initiative is an additional
requirement, mandated by the MOLSA Central Office in Baghdad,
that Veyan,s seven-person staff must travel throughout SaD
to assess the economic impact of each of the 3,237 loans that
will have been disbursed. Veyan stated that, at a minimum, 3
vehicles and 10 additional employees will be necessary to
fulfill this new requirement. Unfortunately, no GoI funds
have been designated to pay for the anticipated increase in
administrative and reporting burdens.

6. (SBU) Veyan also stated that she has not received any
information about the twin Ministry of Industries and Mines
(MoIM) credit facility, which allocated 24 million dollars to
SaD. She knows it is there, but has no idea who is tasked
with administering the program. She did not have any
information about a point of contact and was not aware of any
MoIM disbursements within the Province. She also noted that
the branch managers of the Ad Dour and Beiji offices of Al
Rafidain Bank (disbursement agent for the MOLSA program),
have refused to disburse on 35 and 20 approved MOLSA
applications, respectively. These managers explained that
their failure to fund the approved loans was due to the lack
of specific directives from the Central MOLSA Office in
Baghdad, as well as the lack of technically skilled
employees.

7. (SBU) Veyan is now able to identify examples where MOLSA
loans have yielded tangible improvements in living standards
as well as observable gains in employment. Entrepreneurs,
who used MOLSA grants to establish sewing shops, cell phone
sale and service outlets, computer sale and service centers,
food stores, iron works and carpentry facilities, have been
particularly successful. These entrepreneurs are well into
their second hiring wave. Typically, they have employed
relatives to expand their labor pools and businesses.

COMMENT
-------
8. (SBU) The low disbursement rate of the MOLSA loan program
calls for dramatic improvement. However, unless GoI funded
credit initiatives begin to first direct some capital to
program staffing and administrative support, it is unlikely

BAGHDAD 00002772 002 OF 002


that dramatic improvement will be seen. One possible
solution might be to base future initiatives on a hybrid
model like the I-CERP program which has circumvented the
GoI,s organizational weakness by combining GoI funding with
USG organizational skills to get the money out. END COMMENT.

BUTENIS

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