Palestine International Banking Conference 2013

Fayyad: Small & Medium Enterprises (SMEs) can bring Employment & Compete Locally, Internationally

‘The Great Development & High Organizational Capacity Inspire Confidence in Soundness & Durability of the Banking System’

Jericho, 04/02/2013 – Under the patronage of his Excellency the Prime Minister of Palestine Dr. Salam Fayyad, the Palestine Monetary Authority, PMA, in partnership with International Finance Corporation, IFC, and Association of Banks in Palestine, ABP, organized the ‘Palestine International Banking Conference’, 2013 in the West Bank city of Jericho.

The conference’s theme was ‘Empowering Small and Medium Enterprises (SMEs) in Palestine through Enhancing Access to Finance’, where the main goals were raising interest and supporting awareness on the significance of this sector, being a substantial source for sustainable economic and social development. Empowering SMEs in Palestine and building up preparation through provision of proper means to access sources of borrowing and financing from financial/banking institutions. Goals also included supporting dialogue and partnership between public and private sector institutions, overcoming drawbacks and reducing banking conditions in order to facilitate lending of SMEs.

The conference was inaugurated by the Prime Minister Dr. Salam Fayyad, PMA governor Dr. Jihad Al-Wazir, Deputy Chairman of ABP Mr. Joseph Nesnas and IFC Resident Representative Mr. Youssef Habesch. The conference saw the participation of the banking system representatives in Palestine at the level of general/regional managers and facilitation managers, representatives of Microfinance Institutions, chairpersons of chambers of commerce, economy experts, Palestinian academics and representatives of international organizations.

Dr. Fayyad expressed thanks to the PMA and its partners for the well-organized conference, showing appreciation to researchers who help triggering of ideas and exchange of experience. Dr. Fayyad hopes the conference would strengthen the development witnessed by the banking system in Palestine as a fundamental pillar for national economy. Dr. Fayyad added that Palestine, through the PMA, has progressed and achieved high organizational capacity, which inspire confidence in soundness and stability of the banking system. He also commended the PMA supervision over the banking system, with indication to the praise by the World Bank and International Monetary Fund to its performance and preparedness to operate as a fully-fledged central bank.

Dr. Fayyad asserted the significance of SMEs to provide employment that is capable to compete locally and internationally, reiterated the weight of cooperation to bring financing to these enterprises, and pointed out how important to empower and encourage the banking system to finance developmental projects, which, in total, help reduce unemployment and poverty. The Prime Minister talked about development brought to the banking/financial system of Palestine under the Israeli occupation, encouraging the international finance corporations to provide guarantees to banks in order to enable them offer low-interest loans for small enterprises. The Prime Minister calls upon banks to show preparedness to engage in such initiatives due to the development and expansion they bring to the beneficiaries, and urges development and marketing of new banking products to fulfill needs of the Palestinian people. His Excellency called upon facilitating procedures that allow marketing of Palestinian products in the Israeli market, while these products are entitled to be marketed in European Union countries due to renowned quality, as this would reinforce steadfastness of Palestinians.

In his welcoming speech, Dr. Al-Wazir said that the way towards firm and sustainable economy should pay attention to development and support to SMEs, creation of an incubator environment that increases culture of creativeness and entrepreneurship, qualification of legal milieu and development to financing tools necessary for sustainability. SMEs became important as they constitute 95% of existing businesses, which have great role as to provision of employment opportunities, diversification of income sources, reduction of poverty and expansion of production base, which supports steadfastness of Palestinians against Israeli occupation. Dr. Al-Wazir went on to explain role played by PMA to enhance banking institutions and their quest to get bigger access to financing nationwide, especially in the countryside.

‘Number of businesses went up by 30% in the past three years. This was associated with a value growth by 89% to facilitations given within the same period. Despite these indicators clearly suggest development seen by that sector, we think that more effort is needed to improve it optimally, so it would become a basic representation to economic and social development’. Dr. Al-Wazir said.

The PMA governor talked about its role regarding enhancement of SMEs, where it opened an advanced information center that serves borrowing firms through provision of comprehensive and updated information about businesses. The center also serves new borrower businesses by means of facilitating borrowing and expanding facilitations provided, so activities and products would be increased. A new financial database for SMEs has been listed like that of housing loans and mortgage. This database would provide stakeholders with financial and demographic data necessary for purposes of financial/statistical analysis. This database is expected to facilitate provision of credit to these businesses.

Mr. Nesnas said that SMEs contribute more than half of employment for the private sector, and they have great chances if government effort is combined with the private sector and banks to support them technically, smoothen government procedures and provide financing necessary from banks to fulfill financing needs in operating capital and fixed assets, and, occasionally, to bridge the gap of liquidity resulted by political and economic fluctuation.

‘There is an urge to set a development strategy that takes these needs into account and reinforces this sector’, Mr. Nesnas added. He brought attention to importance of involving all stakeholders in setting that strategy, particularly the government and its role to find proper grounding, stimulus and facilitations that would pave the way for that sector to engage fully in national economy building. Also, Mr. Nesnas reiterated PMA significance to encourage, support and empower banks towards more lending to these businesses, calling upon banks to develop mechanisms and programs to outreach the promising economic groups, and to establish communication between all stakeholders to eliminate impediments standing in the way of developing SMEs, in addition to reach a unified and acknowledged definition of this sector, and then form a special committee to follow up recommendations of this conference.

Mr. Habesch pointed out IFC interest in SMEs and its co-sponsoring of the conference, driven by the belief that this sector is important to development of economies, together with the pivotal role it plays to create employment opportunities, reduce unemployment and encourage entrepreneurship as a major source for labor market. Mr. Habesch talked about role played by IFC to provide technical support, consultation and financing to financial institutions, and work with state agencies to create the proper legislative environment for growth of this important sector. He indicated the growing interest in SMEs in the past few years due to economic value and durability in light of difficult conditions, adding that we need more of these enterprises and that all stakeholders are urged to do more in order to find proper environment for promoting this sector, which provides new development and service opportunities that would help banks increase and diversify portfolios and growth at a steady pace. Habesch calls upon providing support to help banks establish departments and specialized mechanisms for SMEs, in addition to develop the finance leasing law in cooperation with the Capital Market Authority, and the movable property mortgage law and respective register at Ministry of National Economy.

A short film was shown about success stories and challenges that face owners of SMEs (financed by banks and lending firms), and their contribution to social and economic development.

The conference agenda included participation of international expert from WB, IFC and Standard Bank of South Africa, as well as domestic experts. Sessions addressed SMEs sector at both the regional and international level, role played by loan guarantee funds to increase access to financing resources, banking classification strategies for SMEs, an introduction to global experience in the field, role played by investment funds to develop SMEs in Palestine, integration between banks and investment funds and management of banking relations of SMEs.

The conference ended up with several recommendations that will be followed up by a technical committee to guarantee fulfillment of goals. Speakers, international and domestic experts were honored for their effective engagement, which had a great impact on the success of the conference and introduction of recommendations.