Determinants of Financial System Development in Iraq Under the Digital Transformation

This study seeks to identify the financial, administrative, and political determinants associated with the development of the Iraqi financial system, aligning it with contemporary financial concepts grounded in sound governance principles and effective regulations. It aims to enhance the utilization of digital technology and facilitate qualitative management for the optimal allocation of financial resources in both formal and informal markets in Iraq. This paper adopts a descriptive-analytical approach to study the challenges associated with the development of the financial system in Iraq from 2003 to 2022, using secondary data for the Global Findex Database as a digital transformation measure and indicators of financial system development. The findings indicate that several variables influence financial inclusion, a component of digital transformation of the legal framework, technical infrastructure, and human capital development. The determinants of financial infrastructure are characterized by the utilization of digital transactions for monetary transfers via digital channels, the caliber of financial services offered by banks, and the incentives and penalties associated with electronic services provided by banks to enhance the adoption of digital channels. The study shows the importance of integrity, according to the nature of economic and financial authorities, the power and flexibility of modern administrative systems, the ability of the government to set rules for positive incentives and negative deterrence, and the availability of financial facilities to assist and deter financial entities and individuals concerned themselves. The presence of these healthy and transparent practices will provide fertile ground for all learners and innovators of digital financial technologies.