The Impact of Credit Policies on the Credit Risk of Bank Lending in the Iraqi Banking System

Razzaq Altufaili; Mohammad Nadiri; Asgar Noorbakhsh; Sayed Hamid Joshaghani

Authors

Razzaq Altufaili Ph.D. Student in Finance, Banking Specialization, Faculty of Management and Accounting, Farabi College, Qom, Iran Author https://orcid.org/0009-0001-2076-3908
Mohammad Nadiri Associate Professor, Department of Finance and Accounting, Faculty of Management and Accounting, College of Farabi, University of Tehran, Qom, Iran https://orcid.org/0000-0003-1655-3489
Asgar Noorbakhsh Department of Management and Accounting, Farabi Campus of University of Tehran, Qom, Iran Author https://orcid.org/0000-0002-0106-8627
Sayed Hamid Joshaghani Department of Economy, Al-Mustafa International University, Qom, Iran Author https://orcid.org/0009-0007-1711-6164

Keywords:

credit policies, credit risk, non-performing loans, Iraqi banking system, credit policy index, panel data

Abstract

Credit risk has been one of the most significant challenges facing the Iraqi banking system, influenced by the economy’s dependence on oil revenues, weaknesses in informational and institutional infrastructure, and the dual structure of public and private banks. The present study aimed to investigate the impact of credit policies on reducing the risk of bank loans in the Iraqi banking system. In terms of purpose, this research was applied, and in terms of methodology, it employed a descriptive–analytical design with a mixed quantitative and qualitative approach. In the quantitative component, data from 33 banks over the 2015–2024 period were examined, comprising 330 bank-year observations. In the qualitative component, 12 semi-structured interviews and 98 valid questionnaires were analyzed. Data analysis was conducted using a fixed-effects panel model, robust generalized least squares (GLS) estimation, a dynamic generalized method of moments (GMM) model, and three-stage coding. The results showed that the composite credit policy index had a negative and statistically significant effect on the non-performing loan ratio (β = -0.128, p < .01). Capital adequacy, return on assets, economic growth, and oil prices also had risk-reducing effects, whereas inflation and unemployment increased credit risk. The findings further indicated that the effect of credit policies was stronger in private banks than in public banks, while weaknesses in post-lending monitoring, inadequate credit information infrastructure, and technological underdevelopment were among the most important challenges. Overall, the results demonstrated that coordinated improvement of credit policies, together with the strengthening of institutional and informational infrastructure, could lead to a significant reduction in credit risk in the Iraqi banking system.

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