The Palestinian Economy. Theoretical and Practical Challenges

Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 297
1. The Palestinian credit market: institutional background
Before going deeper into the analysis of the aims, efficiency and effectiveness of
Palestinian micro credit, a rapid overview of the main institutional characteristic of the
credit market is in order.
The Palestinian banking system consists of the Palestine Monetary Authority (PMA)
which performs some of the regulatory and monitoring functions of the central bank,
twenty foreign and domestic licensed banks, plus various moneychangers and micro
credit institutions. By August 2009 twenty different banks operated in Palestine, ten of
which foreign (eight Jordanian, one Egyptian, and HSBC bank). Their total equity
amounted to about $893.8 million, with a paid-up-capital of about 77.6%. Banks conduct
business through a network of 205 branches, 159 located in West Bank and 46 in the
Gaza Strip (Table 1).
Table 1: Number of banks and branches in Palestine
Number of Banks Number of bank branches
West Bank Gaza Strip Total
2001 21 89 35 124
2002 20 89 36 125
2003 20 94 37 131
2004 20 96 37 133
2005 20 101 38 139
2006 21 111 40 151
2007 21 119 41 160
2008 21 144 46 190
August 2009 20 159 46 205
Source: Palestinian Monetary Authority, 2009.
Notwithstanding the extraordinary risky conditions under which it operates, the
Palestinian banking system still retains a high degree of confidence among its clients, as
showed by the increasing volume of total deposits. Data show that between the end of
2007 and August 2009, deposits increased by 22.8% to reach the level of about $6.3