Paying import duties earlier increases the cash a business needs before it can sell its goods. Access to suitable finance, together with the skills to manage it, can help small businesses adjust to Iraq’s customs reforms.
Iraq Business Desk analysts reached out to Top Mountain, a management and strategy consulting firm based in Iraq, for its perspective on the transition. Miran Dizayee sees it as an important opportunity for international donors, banks and the Iraqi government to work together to provide the access-to-finance infrastructure needed to support the trade-policy reforms already underway.
Dizayee draws on Top Mountain’s experience as the implementing partner for the Kurdistan Regional Government’s Bloom initiative. Its work brought together partner banks and small businesses, combining improvements to loan-application processes with applicant screening and detailed plans for using loan capital to expand businesses.
International donors, banks and the Iraqi government could use the customs transition to improve how small businesses obtain and manage finance. This means loans with repayment schedules that fit the time needed to buy and sell goods, reliable financial records for lenders to assess, and practical advice for borrowers. Bloom offers an example of how these services can work together.
For an importer, a profitable order can still be difficult to fund. Money goes to a supplier, goods travel, customers receive stock, and only then does cash return. Paying customs charges earlier extends the period during which part of that money is unavailable for another order. The challenge can reach manufacturers and food processors as well as traders, because imported machinery, packaging and raw materials support domestic production.
What the customs change means for cash
Iraq Business News reported in August that the cabinet’s advance-payment framework was scheduled to take effect on 1 October 2026. Under the announced arrangements, importers settle estimated customs duties and tax deposits through ASYCUDA and approved payment channels before banks release covered foreign transfers. Preliminary commercial and customs information provides the basis for the calculation.
The Finance Ministry’s objectives, described in a September statement reported by NINA, include more accurate collection, stronger non-oil revenue, automation and simpler transactions. These are stated policy aims; whether the system delivers faster and more predictable trade must be assessed from implementation.
The financing issue is distinct from the tariff rate. A change in when a charge is collected can increase a firm’s cash requirement even when the charge itself is unchanged. Our companion analysis, Iraq’s import reforms: why the rules are changing and who is affected, examines the wider policy and separates valuation, tariff rates and payment timing.
Requirements may differ by bank, product and border crossing. Importers should confirm the rules for their shipment with their bank and customs adviser, including whether the same arrangements apply in Federal Iraq and the Kurdistan Region.
A profitable order can still create a funding gap
Consider a deliberately simplified order: goods cost US$100,000 and combined duties and deposits total US$23,000. These are assumptions for illustration, not an applicable Iraqi rate or tax calculation. If the supplier is paid in full and those charges must also be funded at that point, the initial cash requirement is US$123,000, before freight, insurance and other costs.
| Assumption | Amount or period |
|---|---|
| Supplier payment | US$100,000 |
| Duties and deposits brought forward | US$23,000 |
| Combined initial funding | US$123,000 |
| Charges paid earlier than before | 45 days |
| Assumed annual financing cost | 12% |
| Extra financing cost on the earlier payment | About US$340 |
The last figure is US$23,000 × 12% × 45/365. It excludes fees and assumes simple interest. The additional funding required during those 45 days is US$23,000; the financing cost is about US$340. Neither figure means the tax itself has increased by US$23,000. If two such payment periods overlap, the extra funding tied up can reach US$46,000, depending on when cash is released.
For a firm with an affordable credit line, that may be manageable. For a firm without one, the practical response may be a smaller order, a later purchase or revised customer terms. Those are possible responses, not measured outcomes of the October transition. Faster clearance, supplier credit or quicker customer collections could offset part of the additional requirement.
The important calculation therefore covers the whole cycle. Funding customs earlier and collecting customer invoices later can reinforce each other. Our payment-delay analysis shows how receivables affect the same pool of working capital.
Why the starting point matters
IFC’s November 2022 SME study offers a dated baseline. Its survey covered 827 enterprises in seven governorates during August and September 2021; only 8% of respondents reported a business bank account. That is a finding about the survey sample and period, not a current national estimate.
A business with a bank account and regular financial records can show a lender how much it needs to borrow and how it expects to repay. A business with incomplete records may first need help documenting sales, costs and cash movements. Making more loan funding available will not, by itself, solve that problem.
Bloom’s contribution: finance, bank accounts and business expansion
In its May 2024 account of Bloom, GIZ described a KRG initiative offering loans through Cihan Bank alongside tailored consulting from Top Mountain. The pilot identified 25 eligible SMEs across the region’s four governorates. Reported terms included loans up to IQD150 million, a 2% management fee and no collateral requirement.
GIZ supported the programme’s design, partner selection, eligibility criteria and monitoring, with German and European Union funding.
As Bloom’s implementing partner, Top Mountain worked closely with partner banks to improve their internal processes for loan applications. The firm screened loan applicants and worked directly with clients to develop detailed plans for deploying loan capital and expanding their businesses. Financial-skills training and support with cash-flow systems complemented this work.
Top Mountain’s role linked the lending process to each business’s growth plans. Preparing an application was part of a wider effort to establish how the money would be used, how expansion would be managed and how cash flow would support repayment. Banks provided the financing, while Top Mountain helped clients translate access to capital into a practical business plan.
Bloom also played an important role in encouraging businesses to open bank accounts. Access to programme finance gave firms a practical incentive to establish a banking relationship and connect their expansion plans with formal financial services.
These accounts are critical business assets for navigating Iraq’s ongoing trade reforms. A business bank account provides a channel for documented payments and transfers and helps establish the transaction history a lender can assess. As customs procedures and import payments become more closely linked to banking channels, the relationships encouraged by Bloom provide a foundation for businesses to manage both financing and trade requirements.
What Top Mountain’s experts told our analysts
Drawing on Top Mountain’s work with businesses and development partners, Dizayee said:
“Access-to-finance is critical to supporting growth, and Top Mountain is proud of the work we have done alongside international donors and the KRI to implement access-to-finance programs such as Bloom. We also see that these programs can address some of the pressing business challenges, such as having to pay prepaid tax to import products to Iraq. Top Mountain provides consulting services to businesses, and this has had a very positive impact on loan repayments from these businesses.”
Dizayee attributes better repayment performance to Top Mountain’s consulting work. This is his assessment of the firm’s experience; no repayment figures are provided here to measure the improvement.
Advisory support can help a business turn a borrowing request into a realistic repayment plan. An adviser can identify a cash shortage before an order is placed, compare purchases with stock and sales, and flag late customer payments before they affect loan repayments. Better records help lenders assess a business, although they do not remove the risk of lending.
The financing product must fit the transaction
The loan should match the business need. A revolving credit line, which can be repaid and used again, may suit repeated purchases of trading stock. Equipment may need a longer repayment period. If repayments begin before an importer can sell the goods and collect payment, the loan may leave the original cash-flow problem unresolved.
Banks need to assess the supplier, goods, duties, expected sales and source of repayment. Verified documents and transaction histories can help. Advisers can improve the information a business provides, while the bank remains responsible for deciding whether to lend.
Businesses should forecast when cash will actually arrive and when payments must be made, including charges due before shipment or clearance. Donors and programme managers should assess whether borrowers receive suitable finance, use it as intended and repay sustainably—not simply count the loans issued.
This connects with the broader banking agenda. IFC and the Central Bank’s September 2024 partnership addressed sustainable finance and environmental and social risk management. Such institutional work is separate from an individual SME loan, but both depend on better information and credible assessment. Our coverage of that partnership explains its scope.
Different businesses will feel different effects
Wholesalers and retailers are directly exposed when they finance imported stock and also give customers credit. Smaller orders may preserve liquidity but sacrifice discounts. Manufacturers and food processors need to consider inputs as well as finished goods: a missing imported component can interrupt production even when most value is added locally.
Engineering and contracting firms may wait for delivery, client acceptance and invoice payment after purchasing equipment. Their finance needs to cover that interval. Businesses that import little may be affected mainly by changes in their suppliers’ prices or delivery times.
Credit also has limits. It can bridge a timing gap in a viable order. It cannot indefinitely compensate for negative margins, unsold stock or an uncollectible receivable. The value of business support lies partly in identifying those differences before more debt is added.
Three paths through the next six months
Over the six months to 31 March 2027, financing access and administrative performance will shape how businesses adjust. Three possible paths are outlined below. They are scenarios, not forecasts, and the available evidence does not support assigning probabilities.
Finance and customs processing improve together. More predictable bank processing, clearer settlement of duties and deposits, and suitable short-term loans allow viable importers to maintain orders. Shorter transaction times, loans reaching SMEs and stable order volumes would support this scenario.
Businesses rely mainly on their own funds. Firms use retained cash, negotiate more time to pay suppliers or ask customers to pay sooner. Those with smaller cash reserves may reduce order sizes. Changes in purchasing and payment terms, without much new borrowing, would point to this path.
Cash shortages and delays build up. Earlier duty payments coincide with slow clearance or late customer payments, leading some firms to postpone purchases or production. Unsold stock, longer waits for customer payments and more requests to reschedule loans would be warning signs. Freight costs, demand and exchange rates could also contribute, so these effects should not automatically be attributed to customs reform.
The cash-flow effect is clear: paying earlier ties up money for longer unless faster clearance, customer payments or other improvements offset it. The size of the effect across Iraq is not yet established. Bloom’s experience shows how lending and practical business support can be combined. Expanding that approach could help small businesses meet new trade requirements while continuing to invest and grow.