The Palestinian Economy. Theoretical and Practical Challenges

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Di Martino – Sarsour
If the spread vis-à-vis the US probably surprises nobody, and the one vis-à-vis
Jordan is not that remarkable, on the other hand these data show how dramatic is the
difference between operating in Israel and Palestine.
The declining economic conditions of vast sectors of the population, combined with
limited amount of credit supply from ordinary banks (or credit supplied at very high
interest rates), suggests that over the last few years the potential market for micro finance
in Palestine grew. The idea that in Palestine a substantial potential for the expansion of
the micro credit sector exists is also supported by results of various empirical surveys.
According to a survey conducted in 2005, the number of potential clients, estimated in
about 30,000 in 2005, was supposed to have increased up to 100,000 in the following 4-6
years. 8 However a subsequent survey dating May 2007 showed how such a development
had remained largely on paper, partly because of the unwillingness of small entrepreneurs
to demand for funds, but also because of the inability of the credit market to respond to
demand when it surfaced. Micro credit institutions, although less rigid in their attitude
than ordinary banks, proved to be partially guilty as well. 9
Data from a more recent survey (Table 2) corroborate this idea. In particular while
the feeling in 2005 was of a potential rapid increase in the number of clients data show
that, in fact, the number declined, while other indicators confirm a pattern of stagnation if
not decline. 10
8 Israel/Palestine Centre for Research and Information (2005).
9 The International Finance Corporation and The Palestinian Network for Small and Microfinance Institutions
(2007).
10 These numbers represents the following seven micro finance institutions representing more than 80% of the
market in terms of number of active clients, active borrowers and portfolios: ASALA, CHF/Ryada, FATEN,
PARC/SLA, PDF/SLU, REEF and UNRWA/MMD.