Iraq’s tech sector is growing despite a struggling financial system

It’s been 21 years since the U.S., U.K., and a group of allied forces invaded Iraq and deposed its leader, Saddam Hussein. And it’s a little over two years since President Biden formally declared the end of the U.S. combat mission in the country.

After decades of war, Iraq’s tech sector is coming into its own. But progress is slow going, says Asoz Rashid, CEO of iQ Group, a multi-sector tech company based in Iraq.  “Iraq’s tech sector mirrors Iraq in general, where the whole country has pretty much been neglected for 40 years or so,” he says. 

The country has had to battle biases and  misperceptions shaped by years of war coverage. “The traditional institutional thoughts which come with Iraq, is, people still think it’s dangerous,” says Rashid.

But things are changing in Iraq, and fast, argues Amanj Yarwaessi, board director at the MEED Foundation, a sustainable development NGO working in the country. “The tech sector has kicked off in the past few years, just because of the proliferation of internet connectivity,” he says. As recently as 2021, less than 50% of the Iraqi population used the internet, according to the International Telecommunication Union, a subsection of the United Nations. A year later, driven by infrastructure providers like iQ Group, that had risen to 79%. And the 2023 arrival of iQ Group’s 2,200-mile fiber optic internet cable that criss-crosses Iraq will help bolster connectivity further.

Companies like iQ Group and others are pushing forward the tech sector, and with it, the wider economy. In March 2023, the country unveiled its first independent technology fund, which was looking at supporting startups working in the fintech sector.

No surprise that there’s such a focus on fintech and payments services. One problem that stymies growth in Iraq on a personal and business level is access to money. Iraq remains a predominantly cash-based society, with banks lagging behind competing countries when it comes to both retail banking and lending services. “The retail side of the banking business is really not as great as it could be,” says Jaffar Agha-Jaffar, associate partner at Phoenix Finance, an advisory firm. And the banks that do exist aren’t exactly up to speed on the latest tech developments, either. (Agha-Jaffar says one major banking executive led a push to include digital services yet couldn’t himself use a computer.)

Nevertheless, tech innovation and digitalization is coming to the country—often from external partners. “You’re seeing regional banks, whether they’re Saudi or Jordanian or Kuwaiti or from Qatar or the Emirates, coming in and setting up standalone branches,” says Hussain Qaragholi, managing partner at Phoenix Finance. The market share of those banks is “mushrooming”, says Qaragholi, and as a result they’re changing Iraq’s banking sector to embrace more technology.

The Central Bank of Iraq’s support is also crucial to the digital revolution, and is forthcoming, according to Qaragholi. “We are seeing the Central Bank starting to take the technological development and digitization of the economy very seriously,” he says.

There are other issues that need to be overcome to enable the tech sector to thrive, too, say those within the country. “The biggest issue is basically skills,” says MEED Foundation’s Yarwaessi. The biggest thing missing in Iraq right now, he says, is “people with the right education, right knowledge, and then the right experience to work in the tech sector.” In large part, the shortfall between supply and demand can be pinned on decades of war. Education systems are still being established, and as the country’s digital expertise and experience with the internet is still relatively short-lived, inherent knowledge within the economy isn’t there.

At the same time, the country can’t afford to both try and rebuild internally while also bringing in the international expertise that would help accelerate development. And those within the country who are leading the way face hurdles in order to bring international cash into their companies.

Part of the long aftermath of Iraq’s difficult recent past is that there are a thicket of financial regulations placed upon companies, both by the internal bank and by external actors wanting to ensure financial probity in the country. “Trying to get funding from abroad is difficult because they have built this complicated set of regulations here,” says Yarwaessi.

The government support doesn’t always match the vision that those within the industry have either, says iQ Group’s Rashid. “Iraq’s in a fantastic geopolitical situation,” he says. “You’ve got the Gulf, which is investing billions upon billions in tech. You’ve got the west and Europe pretty close, north of Turkey, where you’ve got this societal situation of how tech can be used. Iraq can learn from both of these places, and really become a powerhouse in the region.”

But that requires support—which Rashid says is tricky to obtain. He says that government representatives are more likely to visit a tile factory opening than a data center. “I think sometimes even within the government, they don’t actually understand how important technology is to the economy,” he says.

It’s been 21 years since the U.S., U.K., and a group of allied forces invaded Iraq and deposed its leader, Saddam Hussein. And it’s a little over two years since President Biden formally declared the end of the U.S. combat mission in the country.

After decades of war, Iraq’s tech sector is coming into its own. But progress is slow going, says Asoz Rashid, CEO of iQ Group, a multi-sector tech company based in Iraq.  “Iraq’s tech sector mirrors Iraq in general, where the whole country has pretty much been neglected for 40 years or so,” he says. 

The country has had to battle biases and  misperceptions shaped by years of war coverage. “The traditional institutional thoughts which come with Iraq, is, people still think it’s dangerous,” says Rashid.

But things are changing in Iraq, and fast, argues Amanj Yarwaessi, board director at the MEED Foundation, a sustainable development NGO working in the country. “The tech sector has kicked off in the past few years, just because of the proliferation of internet connectivity,” he says. As recently as 2021, less than 50% of the Iraqi population used the internet, according to the International Telecommunication Union, a subsection of the United Nations. A year later, driven by infrastructure providers like iQ Group, that had risen to 79%. And the 2023 arrival of iQ Group’s 2,200-mile fiber optic internet cable that criss-crosses Iraq will help bolster connectivity further.

Companies like iQ Group and others are pushing forward the tech sector, and with it, the wider economy. In March 2023, the country unveiled its first independent technology fund, which was looking at supporting startups working in the fintech sector.

No surprise that there’s such a focus on fintech and payments services. One problem that stymies growth in Iraq on a personal and business level is access to money. Iraq remains a predominantly cash-based society, with banks lagging behind competing countries when it comes to both retail banking and lending services. “The retail side of the banking business is really not as great as it could be,” says Jaffar Agha-Jaffar, associate partner at Phoenix Finance, an advisory firm. And the banks that do exist aren’t exactly up to speed on the latest tech developments, either. (Agha-Jaffar says one major banking executive led a push to include digital services yet couldn’t himself use a computer.)

Nevertheless, tech innovation and digitalization is coming to the country—often from external partners. “You’re seeing regional banks, whether they’re Saudi or Jordanian or Kuwaiti or from Qatar or the Emirates, coming in and setting up standalone branches,” says Hussain Qaragholi, managing partner at Phoenix Finance. The market share of those banks is “mushrooming”, says Qaragholi, and as a result they’re changing Iraq’s banking sector to embrace more technology.

The Central Bank of Iraq’s support is also crucial to the digital revolution, and is forthcoming, according to Qaragholi. “We are seeing the Central Bank starting to take the technological development and digitization of the economy very seriously,” he says.

There are other issues that need to be overcome to enable the tech sector to thrive, too, say those within the country. “The biggest issue is basically skills,” says MEED Foundation’s Yarwaessi. The biggest thing missing in Iraq right now, he says, is “people with the right education, right knowledge, and then the right experience to work in the tech sector.” In large part, the shortfall between supply and demand can be pinned on decades of war. Education systems are still being established, and as the country’s digital expertise and experience with the internet is still relatively short-lived, inherent knowledge within the economy isn’t there.

At the same time, the country can’t afford to both try and rebuild internally while also bringing in the international expertise that would help accelerate development. And those within the country who are leading the way face hurdles in order to bring international cash into their companies.

Part of the long aftermath of Iraq’s difficult recent past is that there are a thicket of financial regulations placed upon companies, both by the internal bank and by external actors wanting to ensure financial probity in the country. “Trying to get funding from abroad is difficult because they have built this complicated set of regulations here,” says Yarwaessi.

The government support doesn’t always match the vision that those within the industry have either, says iQ Group’s Rashid. “Iraq’s in a fantastic geopolitical situation,” he says. “You’ve got the Gulf, which is investing billions upon billions in tech. You’ve got the west and Europe pretty close, north of Turkey, where you’ve got this societal situation of how tech can be used. Iraq can learn from both of these places, and really become a powerhouse in the region.”

But that requires support—which Rashid says is tricky to obtain. He says that government representatives are more likely to visit a tile factory opening than a data center. “I think sometimes even within the government, they don’t actually understand how important technology is to the economy,” he says.