Visa Is Everywhere You Want to Be, Like Baghdad

BAGHDAD —  When an Iraqi expatriate was preparing to return to the United States after a brief visit to his native land this summer, his hotel bill totaled more than 160,000 Iraqi dinars. But instead of paying with a wad of notes nearly half a foot high, he simply uttered two words that had not been heard in Baghdad in more than a decade: Charge it.

The transaction at the Sumerland Hotel here was only worth about $100, but it marked a first step by Visa International to bring charge cards to Iraq and introduce a quintessential American symbol to a nation whose ancestors invented the concept of credit.

Although occupation authorities are still struggling to provide electricity and clean water throughout Iraq, the San Francisco-based credit card giant is so confident that the country will embrace plastic, it began mapping its commercial invasion early this year -- even before the U.S. launched the first Tomahawk missiles in the Iraq war.

Like other U.S. firms, Visa had been banned from doing business in Iraq because of international sanctions, which were lifted in May after more than a decade. But even before that, credit cards were extremely rare, making Iraq one of the biggest untapped charge markets in the world.

Although the potential seems vast, so are the challenges: Regular telephone service -- necessary for the machines that authorize purchases -- is still unavailable. Merchants are reluctant to pay Visa’s fees. And Islamic leaders are counseling that usury and profits from loans are serious crimes under the Koran.

“Interest is like eating fire,” said Sheik Mahmood Wisaya of the Al Gailani mosque, the biggest house of worship in Baghdad for Sunni Muslims.

Across town, the imam at the Mother of All Battles mosque, recently renamed the Mother of All Villages, eyed a shiny plastic Visa card and listened as an interpreter explained that it can be used to buy goods, which a customer pays for later -- along with a fee or interest.

“In Islam, this is not allowed,” said the imam, Thaer Ibrahim Shammari, who also teaches at the Islamic College. “Every loan in which a profit is made will hurt the man who gets the loan. I don’t approve of this company.”

His father, Ibrahim, offered another reason why Visa may face obstacles in postwar Iraq. “I would boycott even the air if it came from the Americans,” he said.

Still, Visa is bullish about its prospects, particularly in serving the thousands of U.S. officials, humanitarian aid workers, journalists and foreign business leaders who have flooded Iraq for the rebuilding effort. They will spend millions on hotels, restaurants and supplies in the coming years, and Visa is eager to pick up a chunk of the payments, which now must be settled in cash, usually Iraqi dinars or U.S. dollars.

“We knew there would be a huge opportunity after the fall of the regime,” said Hani Qadi, chairman of Visa’s Jordan operations and general manager of the Amman-based Arab Jordan Investment Bank. Officials at MasterCard and American Express said they too intended to break into the Iraqi market but were moving more slowly, because of the lack of security and infrastructure.

Qadi, who helped introduce credit cards to Jordan 10 years ago, said Iraq had all the right ingredients.

For starters, the unstable, devalued Iraqi dinar makes large purchases a security risk. Although U.S. officials plan to introduce a new currency in October, only 250-dinar notes are widely available now. That means a consumer buying an $800 TV set would have to bring more than 5,000 notes -- enough to fill a suitcase -- or pay in U.S. dollars.

In addition, despite the war damage and years of neglect, Baghdad still boasts a strong shopping culture.

“Iraqis, in general, like to spend money,” said Falah Khu- dhairy, the owner of the Sumerland Hotel and an executive at Essalam Investment Bank, Visa’s official agent in Iraq.

On the sensitive topic of religion, Visa officials say they are confident that they will be able to satisfy those concerned about Islamic prohibitions by tweaking their cards, as they have done in other Middle Eastern countries such as Saudi Arabia. Instead of offering a revolving credit card that charges interest, they say, the company will push annual-fee charge cards whose balances must be repaid in full each month, or debit and prepaid cards that withdraw funds directly from a bank.

“We leave it up to the bank to decide which type of card to offer its customers,” Qadi said.

Some Islamic clerics worry that even with changes to remove interest, a credit-card economy will be harmful to Iraqis, encouraging them to spend money they don’t have. They accuse Visa of trying to exploit the local population.

“The company knows that the majority of Iraqis are poor and they will be forced to get loans from the company,” said Shammari, the imam.

But the acting director of the Islam Bank -- which tries to operate in accordance with Muslim principles -- predicted that a compromise would be reached as long as Visa cleared its products with Islamic scholars.

“We will find a way to readjust it to Islamic law,” said Sami Thami, the bank director, now operating from a barren office with no electricity or phone service after looters hit his nine branches. “We think it will be a good thing for Iraq.”

Merchants say they feel caught in the middle.

At his Sony electronics store in Baghdad’s Arasat shopping district, merchant Bashar Khalad frequently hires guards to facilitate large cash sales. Security concerns have only grown amid the lawlessness in Baghdad.

“We need this. It would help me and help the customers,” Khalad said about the prospect of accepting charge cards. “But if my cleric said it was not allowed, I would not get close to it.”

Nearby, brothers Thaar and Uday Abbass own an antiques shop that caters to wealthy diplomats who can afford carpets priced as high as $20,000. But they frequently lose sales when foreigners are unable to use their cards.

“It happens all the time,” Thaar Abbass said. “We would sell much more if we had credit cards.”

Despite such interest, merchants have been slow to sign up with Visa. Many are declining to sign up while reliable telephone service is unavailable. Until service is restored, they would be required to use expensive satellite phones to authorize transactions and then submit receipts by mail, resulting in a week’s delay before they receive their money.

Nevertheless, the company expects that about 20 large hotels and restaurants in the capital will accept the card by the end of the year. For the time being, the Visa logo so familiar to Americans is visible only at the Sumerland Hotel. But the owner says charging has been slow because the hotel is filled with U.N. workers, who are paid in cash and prefer to pay in cash.

“It’s not going to happen overnight,” Visa’s Qadi said. “But by this fall, you will really start to see exponential growth.”