Introduction The banking sector is a cornerstone of economic development, acting as a financial intermediary between savers and investors, and contributing to the financing of productive projects and the promotion of economic growth. However, the reality in Iraq indicates the limited contribution of this sector to achieving the desired economic development, despite its potential and resources. This issue raises fundamental questions about the causes of this weakness, its repercussions, and ways to address it. First: The Reality of the Iraqi Banking Sector The Iraqi banking sector comprises a mix of public and private banks. Public banks dominate the largest share of banking activity, while private banks suffer from a limited role and a lack of public trust. Despite the developments the sector has witnessed since 2003, it continues to face structural and regulatory challenges that hinder its developmental performance. Second: Manifestations of the Banking Sector's Weak Contribution to Development 1. Limited Financing Directed to the Productive Sector Banks focus heavily on short-term financing, particularly consumer loans, at the expense of financing industrial and agricultural projects, thus weakening their impact on creating real added value. 2. Low Financial Inclusion A large segment of the population remains outside the banking system, reducing the amount of savings available for investment and limiting banks' ability to expand their operations. 3. Weak Trust in the Banking Sector Trust is a crucial factor in attracting deposits, but past experiences and financial crises have contributed to individuals' reluctance to deal with banks. 4. The Dominance of the Rentier Nature of the Economy The Iraqi economy relies heavily on oil revenues, which reduces the need for an active banking role in financing productive sectors. 5. Weak Financial and Technological Innovation Electronic banking services remain limited compared to other countries, affecting the efficiency and attractiveness of banking operations. 6. Challenges of the Legal and Regulatory Environment The banking environment suffers from complex procedures and weak enforcement of laws, which limits banks' ability to expand and innovate. Third: Fundamental Reasons for Weak Contribution: • Weak financial infrastructure: a lack of modern systems and electronic payment systems. • Deficient credit policies: banks are hesitant to grant loans due to high risks. • Unstable economic and political environment: which increases uncertainty. • Weak coordination between monetary and fiscal policy: which limits the effectiveness of economic tools. • Shortage of specialized banking expertise: particularly in the areas of development finance and risk management. Fourth: Economic Consequences of the Weak Banking Role • Slower economic growth. • Weak domestic and foreign investment. • High unemployment rates. • Continued dependence on the oil sector. • Low efficiency in resource allocation. Fifth: Prospects for Reform and Strengthening the Developmental Role 1. Enhancing financial inclusion by expanding banking services to include broader segments of society, especially in rural areas. 2. Developing Digital Infrastructure Investing in Financial Technology (FinTech) and Electronic Payment Systems. 3. Stimulating Productive Financing Encouraging Banks to Finance Small and Medium Enterprises (SMEs) through Government Guarantees. 4. Reforming the Legal and Regulatory Framework Simplifying Procedures, Enhancing Transparency, and Protecting Investors' Rights. 5. Building Trust By Improving the Quality of Banking Services and Strengthening Oversight and Disclosure. 6. Diversifying the Economy Reducing Dependence on Oil and Strengthening Non-Oil Sectors to Create Genuine Demand for Bank Financing. Conclusion The weak contribution of the banking sector to economic development in Iraq is not the result of a single factor, but rather the product of a confluence of structural and institutional challenges. Overcoming this issue requires adopting comprehensive reforms aimed at developing the banking sector and enhancing its role as an effective instrument for achieving sustainable development. Building a strong and efficient banking sector is a fundamental step towards achieving a diversified and stable economy.