'IRAQ AND THE PERSIAN GULF' [‎312v] (627/862)

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CURRENCY, FINANCE, COMMERCE, AND OIL
Banking
Banks in Iraq fall into two categories: those engaged in financing
foreign trade and those concerned with internal affairs. Of the
former, the Ottoman Bank, the Eastern Bank, and the Imperial Bank
of Iran (formerly of Persia), have been established for many years in
Iraq and now have branches in the principal towns. They cover all
branches of banking. Until 1940 the Italian Banca di Roma also had
a Baghdad branch. The second category comprises the many local
bankers (sarrafs) who accept deposits, discount bills, and give short
term advances against property and bullion. This form of banking
developed considerably during the ’thirties, and recently the use of
cheques has extended. In 1936 the Government established an
Agricultural and Industrial Bank, whose main purpose was to provide
cheap credit to cultivators and for new industrial ventures, and in
1941 the Rafidain Bank was established to act as a State bank; the
latter also undertakes domestic banking and to some extent finances
foreign trade. In 1935 a Post Office Savings Bank was authorized and
has since achieved remarkable success. The ruling bank rate was 6 per
cent, until August 1932, then fell to 3 per cent, but rose again. The
maximum interest chargeable on loans is limited by law to 7 per cent.
Under the Law for the Control of Banking of 1938, banking is
defined as the taking of deposits and the making of advances of any
kind, and the purchase, sale, and negotiation of commercial bills of
all kinds. This definition applies to foreign banks trading in Iraq, as
well as to local banks. No bank is allowed to purchase immovable
property or lend money on the security of it, except buildings for its
own occupation, and property taken in settlement of debts, in which
case it must be sold within five years.
Merchants give credit among themselves on a system of compialas
(promissory notes) and in times of crisis they help one another and
seldom have recourse to the courts in case of failure.
COMMERCE
Apart from the export of dates and barley, the import of manu
factured goods, and the transit trade with Persia, the external com
merce of Iraq stood at a low level in Ottoman days. Foreign trade
expanded greatly during the war, but the increase was not caused
by greater production but by the requirements of the occupying
armies. At the end of the war purchases within the country by the
British had increased to such an extent that cereal exports had fallen