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Abstract

Banks and financial institutions serve as financial intermediaries between depositors (savers) and fund users (borrowers). This intermediation defines the credit relationship, which arises between a party with surplus resourcesthe savers—and a party whose needs exceed their available resources the borrowers. This relationship manifests in two forms: direct, occurring without external intervention, or indirect, facilitated by a third-party financial intermediary, such as a bank. The practice of banking involves significant financial risks that can lead to profound negative impacts. These consequences often stem from the failure of deficit units to repay loans due to adverse financial and economic conditions affecting borrowers. Consequently, banks must secure their rights and ensure capital recovery to fulfill their obligations toward depositors. To mitigate these risks, banks mandate collateral as a prerequisite for providing financing to various projects, regardless of their scale. This requirement highlights the challenge of financing Small and Medium-sized Enterprises (SMEs), as they often lack the assets and guarantees necessitated by banks. This core issue defines the study's problem: the mechanisms through which SMEs can secure the necessary funding for their establishment and growth. Furthermore, the regulatory framework for SMEs remains poorly defined. In Iraq, there is a lack of a specialized agency dedicated to providing integrated services—ranging from identifying investment opportunities and conducting feasibility studies to securing financing and facilitating marketing processes. Instead, services are fragmented across several entities, including the Ministries of Labor and Social Affairs, Planning, Industry, and Finance, as well as the Central Bank. While these bodies oversee legislation and industrial regulation, their efforts are largely confined to providing modest, unplanned, and unorganized credit facilities. This institutional fragmentation has hindered effective support for SMEs, resulting in the absence of a programmed development strategy, despite the vital role these enterprises play in bolstering the national economy.

DOI

10.33095/jeas.v16i59.1506

Subject Area

Economics

First Page

108

Last Page

129

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