Financial Sector in Palestine
There are many businesses, institutions and companies operating in the financial sector in the West Bank and Gaza Strip. These include the monetary authority and general banks that have risen in number to a total of 20. These include non-banking financial institutions including the Palestinian Capital Market Authority for securities, 9 private companies and financial centres as well as 10 insurance companies. The added value generated from financial establishments in both the banking and non-banking sides saw continuous growth, reaching US$342.2 million in 2008, a 34% increase from 2006.
With the establishment of the PNA in 1994, the Palestinian Monetary Authority (PMA) emerged, accompanied by the opportunity to open the Palestinian banking sector once again after a blockade that extended since 1967. Since then, the number of banks has been regularly increasing, reaching 19 banks with 209 branches and offices at the end of the first quarter of 2010, among them 9 local banks and 10 foreign banks. Among the foreign banks, 8 are Jordanian, one is Egyptian and one is owned by HSBC. Also, 2 Islamic banks operate in the West Bank and Gaza Strip.
Banking activity since 1994 has increased in total value, with public deposits reaching US$6.3 billion in 2009, and the total value reaching US$2.2 billion at the end of 2009. Figure 2 below shows the growth of credit facilities from 1997 until 2009. The ratio of loans to private sector deposits is low in the West Bank and Gaza in comparison with neighbouring countries. The growth in public deposits in 2009 was accompanied by a clear growth in lending. The percentage of credit to total lending facilities lending went up from 61% in 2008 to 69% at the end 2009. This increase was at the expense of the debit account which fell during the same period from 38% to 30%.
Figure 2: Credit Facilities in 1997-2009, in Million Dollars
Source: MAS (2010) Economic and Social Monitor
There is no national currency and so three different currencies are widely used in the West Bank and Gaza Strip; the Israeli Shekel in daily financial transactions, and the Jordanian Dinar and U.S. Dollar in savings and investments and for the purchase of durable goods. It is possible to make deposits and withdrawals from banks in any of these three currencies (see the following table).
Banks Operating in West Bank and Gaza at the End of 2009
|1||Bank Name||Founded||The number of branches||Office Address/Regional|
|2||Jordan Kuwait Bank||1995||2||Ramallah – Almaref Street|
|3||Arab Islamic Bank||1995||7||Al-Bireh – Nablus Street|
|4||Palestine Islamic Bank||1995||13||Ramallah – Jerusalem Street|
|5||Ahli Bank||1995||5||Ramallah – Zahra Street|
|6||Jordan Commercial Bank||1994||5||Ramallah – Street Almanara|
|7||Commercial Bank of Palestine||1994||5||Ramallah District, Qaddura – Alawda Street|
|8||Arab Bank||1994||14||Ramallah District, Masyoun – Grand Park Hotel Street|
|9||Arab Palestinian Investment Bank||1996||1||Ramallah, Ramallah Al-Tahta|
|10||Egyptian Arab Land Bank||1994||4||Ramallah – Jerusalem Street|
|11||Union Bank||1995||1||Ramallah – Downtown – Albareed Street|
|12||Bank of Jordan||1994||10||Al-Bireh – Nablus Street|
|13||Palestinian Investment Bank||1995||7||Ramallah District, Al-Nahda – Alhlal Street|
|14||The Housing Bank for Trade and Finance||1995||12||Ramallah – Albareed Street|
|15||Al Rafah Bank||2006||3||Ramallah – Al-Ersal|
|16||Cairo Amman Bank||1986||18||Ramallah – Masyon – Al-Maahed Street|
|17||Al Quds Bank||1995||11||Ramallah – Main Street|
|18||Palestine International Bank||1996||3||Al-Bireh – District Sbeha – Ras Al-Tahona|
|19||Bank of Palestine PLC||1960||66||Ramallah, Ein Misbah – Old Al – Mahkama Street|
|20||HSBC Bank||1998||1||Ramallah – Jaffa Street|
The small loans and microfinance market made notable developments in 2008 and 2009. The total value of loans reached US$48.5 million in 2008 and US$51.9 million in Q1 2009, as compared to US$39.6, US$38 and US$32.3 million in 2005, 2006 and 2007 respectively. Note that this data refers to 9 credit organizations. Currently, there are 12 establishments offering these services.
In 2002, a network was established to regulate the small loans and microfinance market, named ‘Sharaka’. This network aims to empower the service providers to promote their work and facilitate access to their services for SMEs, as well as low income beneficiaries. The members of this network are: the Palestine for Credit and Development (FATEN), the Palestinian Businesswomen’s Association (Asala), The Palestinian Agricultural Relief Committees (PARC), American Near East Refugee Aid (ANERA), the Department of Micro Financing, the United Nations Relief and Works Agency (UNRWA), the Arab Centre for Agricultural Development (ACAD), the Cooperative Housing Foundation (CHF)(RIADA), the Palestinian Development Fund (PDF), The Young Men’s Christian Association (YMCA), and Caritas Jerusalem (The Holy Land).
Average Size of Small and Medium Loans in Palestine 2005-2009
|Average Loan Size ($US)||1352||1526||1569||2261||2397|
|Average Loan Size / GNI per Capita (%)||89||102.5||104.9||147.6||154.6|
|Return on Portfolio (%)||13.5||12.1||11.5||17.1||19.4|
To support this vital sector, the Palestinian Cabinet decided to delegate the responsibility of regulating this sector to the Palestinian Monetary Authority and the latter has started to provide its services to advance this sector including a system for a background check on borrowers. The indicators report issued by “Sharaka” on 30 September 2009 showed a marked increase in credit at a 6% increase in the average of the first 3 quarters of 2009 compared to 2008.
A survey conducted by the company “Planet Finance” revealed that 79% of those surveyed in the West Bank are interested in borrowing to expand their existing businesses, 45% wish to begin a new business and 49% want to finance assets. For the Gaza Strip the figures were 43%, 8% and 6% respectively in the same year. The number of small loan customers and microfinance clients is 133,890 in the West Bank and 69,660 in the Gaza Strip with a total 203,550 during that year.
The insurance industry in Palestine began working after the establishment of the PNA and was enhanced after the foundation of the Palestinian Capital Market Authority, which is the regulatory agency for the insurance sector. In 2008, the insurance sector in Palestine achieved 28% growth in comparison with the previous year. However, there still remain significant opportunities for development. The number of insurance companies operating in the West Bank and Gaza Strip has increased from 1 in 1993 to 9 today (see the table below). However, these companies are unable to completely cover the Palestinian market, so the insurance sector in the West Bank and Gaza Strip is still in need of expansion, development and increased investment.
Insurance Companies Operating in the West Bank and Gaza
|Name of the Insurance Company||Types of Insurance||Year of Establishment||Number of Branches||Address of Main Office/ Regional Office|
|Arab Life and Accident Insurance Company||Health, accidents, fire and property , marine, life||1995||7||Ramallah – Al-Quds Street next to the Esso Gas Station|
|Almashreq Insurance Company||Health, accidents, fire and property , marine, life||1992||10||Al-Bireh – Im Sharayet, near Yellow Pages|
|Palestine Insurance Company||Health, accidents, fire and property, marine, life||1994||6||Al-Bireh – Im Sharayet, near Yellow Pages|
|American Life Insurance Company||Health, life||1996||3||Ramallah – Al-Mughtaribein Square, Central Building|
|National Insurance Company||Health, accidents, fire and property, marine, life||1993||8||Al-Bireh – Al-Bireh Municipality Street, Abraj Building|
|Trust International Insurance Company||Description||1994||12||Al-Bireh – Al Quds Street, Trust Building|
|Al Ahlia Insurance Group||Health, accidents, fire and property, marine||1994||13||Ramallah – Masyoun, Behind the Jordanian Embassy|
|Al Takaful Palestinian Insurance Company||Health, accidents, fire and property, marine||2008||4||Al-Bireh, Jerusalem Street, Al- Sheikh Building|
|Palestine Mortgage and Housing Corp||Real Estate Mortgage||1997||2||Ramallah – Jerusalem Street|
Source: The Palestinian Capital Markets Authority: www.pcma.ps
The PSE saw stable returns in 2007, 2008 and 2009, even during the global market crisis that intensified from Q4 2008 and resulted in a huge drop in value. Despite this, investors managed to avoid significant losses. In 2009, the Al Quds index fell by 17.3%, considered to be relatively low in comparison to losses suffered by financial markets in other countries. This is indicative of the relative stability of the Palestinian financial market due to its limited integration with global markets.
Al-Quds Index Value in 1997-2009 (Points)
Source: Website of the Palestine Securities Exchange www.pse.com
39 companies were listed on the PSE at the end of 2009 distributed as follows according to sector: the banking sector (7 companies), the insurance sector (5 companies), the investment sector (8 companies), the service sector (9 companies) and the industrial sector (10 companies).