Is Development Finance the Answer to Kurdistan's Economic Crisis? | The American University of Iraq Sulaimani

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Is Development Finance the Answer to Kurdistan's Economic Crisis?

Friday, April 14, 2017 - 17:00

The international community and every single government in the world endeavors to eradicate poverty and build sustainable development to enhance their economy. Many countries introduce development finance as a method to help develop their economic status. Development finance is a huge sector that enables movement of loans and grants to help public and private sector management, which consequently leads to higher standard of living, employment, and economic growth. Development finance institutions usually target the poor in areas of the world where there is ongoing conflict and poverty. They provide medium and long-term loans, mortgages, and grants to develop industry, agriculture, manufacturing and other key sectors.  The projects that are qualified to be funded are usually profitable, viable, sustainable, and capable of generating employment and economic growth.

Development finance is about promoting an integrated approach to provide funds and capital to support and sustain projects. It funds sectors like manufacturing, industry, and agriculture to maximize the use of innovative technology. It also builds a bridge between trade and investment to raise employment and propel the economy. Developing countries have, in recent years, increasingly taken advantage of this financial system to boost their growth. The backbone and driving force for any project is money. Funds are used for the purchasing of local and foreign resources such as equipment, factory expansion, and establishing and investing in creating a professional and skilled workforce to drive the projects. 

Development finance works through loans, equity and guarantees. Loans are usually provided by investment banks, which are a driving force for this process of funding projects that are capable of generating profits and sustaining themselves by supporting them with direct or indirect loans in addition to joint ventures. Also, there are state-owned organizations such as WB and non-profit organizations such as IMMDF which fund projects. These organizations need effective business plans to ensure maximum profit from the projects they are funding. Development finance activities are costly, and if there are not guarantee of greater returns, the projects will not be funded. Also, there are some activities that, as a result of social norms, cannot be funded and are restricted due to the potential harm or its unviability to the society. Consequently, projects should not be spoon-fed to their final stage and financing organizations should better teach the projects how to sustain and propel forward rather than finance it down to the last penny.

One way that development finance can help Kurdistan is through applying it on agriculture. The Kurdistan Region of Iraq is an oil based country which largely depends on the oil and gas sectors for revenue. With the help of development finance, agriculture can become a driving force for the economic bloodstream of the country and provide a huge return of finance for the country.

Article by Ansar Omer, a writer for the university newspaper The Voice. This piece was originally published in the latest issue of the newspaper.