Despite the Crises Experienced by the Economy in 2020 Palestine Monetary Authority: Banking Sector has Maintained Strength and Growth of Deposits and Banking Facilities
The financial statements of the Palestinian banking sector, until the end of 2020, showed to what extent the strength of the Palestinian banking sector, its resilience and its ability to continue the delivery of its services without interruption, despite the crises experienced by the national economy during the past year. Which were represented by the current health crisis resulting from the spread of the Covid-19, the clearance revenue crisis that resulted in the salary cuts of salaries of public sector employees, and the delay in the disbursement of dues to the private sector, suppliers and development projects implemented by the government.
The financial statements indicated that the banking sector maintains the strength of financial safety indicators in terms of capital solvency and the cash liquidity. Hence, at the end of 2020, the capital adequacy ratio was about 15.7%, which was higher than the minimum capital adequacy ratio of 13% set by Palestine Monetary Authority (PMA), while total asset growth was 10.93% at the end of last year.
PMA has strengthened the cash liquidity in the banking sector, enabling it to continue to provide credit facilities to the private sector and projects affected by the crisis, as well as to provide credit to the Government to enable it to meet its financial obligations and maintain the economic cycle in exceptional circumstances. PMA has issued regulatory instructions to the banks to provide and inject additional liquidity into the economy, in addition to its direct intervention to inject liquidity from time to time during past periods.
The banking sector has played a key role in maintaining the continuity of the Palestinian economy, and has been an essential tool for the continuation of economic development, by directing its credit policies to various sectors, particularly production sectors. The total direct facilities by the end of 2020 grew by 12%, reaching $10 billion, compared to $9 billion in 2019.
The data indicated the impacts of activating the instruments used to enhance financial stability. Through the PMA’s policies that simulated the banks, by granting them privileges to provide facilities to the important and the vital economic sectors, particularly the productive, industrial and health sectors. Hence, 78% of the banking facilities went to the private sector representing various sectors of the economy. While, the facilities granted to the real estate and construction sector totaled 18%, the public trade sector 15%, the service sector (health, education, telecommunications and professionals) 11.2%, consumer goods finance, housing improvement loans 13.8%, industry and mining 4.7%, land 3.2%, agriculture and livestock sector 1.5%, tourism sector 0.9%, transport 0.3%, equity investment finance and financial instruments 0.4%, and car finance loans 4%.
The banking indicators confirmed the continued confidence of Palestinian citizens in the banking sector, in its stability and durability, especially during the pandemic. The customer deposits in banks increased by 13.09% and reached $15 billion at the end of 2020, an increase of about $2 billion over 2019, and geographically distributed by 90.6% in the West Bank and 9.4% in Gaza Strip.
The "Sustainability" program for the financing of small, medium and micro enterprises (SMEs) launched by PMA at the beginning of the Covid-19 pandemic, played an important role in contributing to the sustainability and coverage of the operational expenses of many economic enterprises affected by Covid-19 pandemic. The total capital of the facilities funded by the program was approximately $300 million, through the provision of credit facilities of more than $65 million, which contributed to the sustainability of the work of around 11,000 employees in those enterprises. PMA is currently working on the development of the “Sustainability” program to be a permanent program within the standards that enable wider segments of the society to benefit from it, to contribute to economic development and in consistent with the government's development plan.
In keeping with the rapid developments in the financial technology sector, and in order to achieve PMA's strategy in the field of financial inclusion, PMA has developed the infrastructure of electronic payment systems and tools and allowed the introduction of advanced technology in the field of financial technologies with the aim of providing financial services to all segments. The PMA has licensed five new companies that provide electronic payment services, with the aim of developing retail payment methods and expanding their use and enabling all individuals to complete their financial transactions easily and safely without being restricted by geographical boundaries, ensuring the inclusiveness of these services to marginalized areas, as well as the youth sector for its important role in promoting the culture of electronic payment.
In this context, the PMA has also operated the electronic clearance system, which operates by the principle of electronic exchange of cheque images and information, without exchanging the origin of paper cheques, for the purposes of implementing the process of clearance between banks operating in Palestine and collecting cheques for the benefit of citizens. That means accelerating the turnover of funds and cash liquidity in the local economy. Which will have a positive impact on the national economy, banks and citizens alike, strengthening confidence in the cheque as a loyalty tool, gradually reducing the clearance period to one working day or less, and reducing the period of floating funds.
In the field of Islamic banking, the Supreme Sharia Supervisory Board has activated several decisions and opinions on the authorization of financial products and services implemented by Islamic banks and specialized lending institutions. To indicate their provisions and conditions of implementation in full accordance with the provisions of Islamic sharia and the standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions.
The PMA emphasizes its continued efforts in everything that contributes to the stability, growth, development and sustainability of the Palestinian banking sector, reducing the risk on the banking system in particular, and the financial system in general, as well as promoting financial inclusion in Palestine. In addition, contributing to the recovery from the effects of the financial crisis caused by Covid-19 and its repercussions, and taking measures to support growth and achieving better growth rates than last year at the national economy level.