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Building a Blended Finance Facility for SME Growth and Job Creation in Iraq – Lessons from the Enterprise Development Fund
Iraq's micro, small, and medium-sized enterprises (MSMEs) face persistent barriers to growth with the financing gap for SMEs estimated at 6.5 Billion USD, including limited access to affordable finance, high collateral requirements, and insufficient investment capacity to expand and formalize their businesses. This case study examines IOM's blended finance initiative, developed under the Enterprise Development Fund (EDF) framework in partnership with the Central Bank of Iraq (CBI), Iraqi private banks, and the Iraqi Company for Banking Guarantees (ICBG). The initiative combines IOM grant funding with concessional lending and risk-sharing mechanisms to unlock finance for growth-oriented SMEs while promoting financial inclusion, job creation, and local economic development.
A key feature of the initiative is its comprehensive investment readiness support package, which prepares SMEs to successfully access and manage finance. Participating businesses receive tailored business development services, financial literacy and bookkeeping training, investment readiness assessments, mentorship, and advisory support to strengthen their financial management systems, business planning, and growth strategies before entering the lending process. Through a structured partnership model, grants help de-risk investments, banks expand lending to underserved businesses, and guarantee mechanisms reduce collateral requirements and facilitate access to credit.
The pilot aims to support 100 SMEs initially, creating a proof of concept for scaling blended finance solutions across multiple governorates. By leveraging EDF's integrated approach of enterprise development, investment readiness, and access to finance, the initiative demonstrates how humanitarian and development actors can partner with financial institutions to mobilize private capital, strengthen SME competitiveness, and advance inclusive economic recovery and resilience in Iraq.
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