Palestinian banks: resilient but underemployed
One would expect the banking sector to be a shambles in Palestine but it is in a period of dynamic growth. According to the Palestine Monetary Authority, the central bank, the sector grew by 22% in 2007; total assets are $7 billion, client deposits $5 billion, compared with $150 million at the time of the Oslo Accords in 1993, according to the Bank of Palestine.
There are 21 banks in the Palestinian Territories, compared with three at the time of the establishment of the Palestine Monetary Authority in 1994. Ten are local, 10 Arab (with Jordan particularly well represented) and there is one bold multinational – HSBC – that runs a branch in Ramallah. All are privately owned and between them they have 175 branches. "They’re incredibly resilient," says Michael Essex, director of the Middle East and North Africa at the International Finance Corp.
They don’t do much, though. "Due to political uncertainties and border closures, the banking sector has followed very conservative lending policies in terms of absolute exposure," says Hashim Shawwa, general manager of the Bank of Palestine. "Bank credit penetration is very low, with loan to deposit ratios at 35% compared with 78% in developed countries." It’s partly for this reason that organizations such as the IFC, Opic and Aspen have a trend to build risk-sharing and long-term financing programmes such as the affordable housing initiatives.
Banks are active in time and savings deposits, Islamic murabaha and foreign exchange, but getting them into anything longer term, even trade finance, is challenging.