The Bank of Palestine is striving to bring more of the Palestinian population into the banking sector as a means of driving economic development within the territory.
The bank is widening access to basic bank accounts and increasing the provision of credit to both individuals and businesses. It is also set to launch a new fund dedicated to providing funding to entrepreneurs.
We still need to connect communities that have been really underserved and dont have basic banking services. We are playing a key role going to these communities, opening branches, and providing a safe place to put their money, Hashim Shawa, chief executive officer of the bank tells MEED.
Shawa says that within just five years the bank has increased its number of customers from 250,000 to 600,000 and increased its assets from $1bn to $2.2bn.
Its efforts are helping fuel profits at the bank, as well as deepen its deposit base and boost its loan book. In the third quarter of this year, the bank posted increased profits of $38.6m, a rise of four per cent on the same time period last year. Deposits hit $1.8bn, an increase of close to 14 per cent on the same period in 2012, while its loan book grew by close to 10 per cent.
Deposits are growing at an average rate of 19 per cent per year while net profit has grown by 13 per cent every year, Shawa says.
There is huge room for an increase in lending. About five years ago, Bank of Palestines loan to deposit ratio was around 30 per cent. It is now reaching 65 per cent as we open more
branches and try to give more loans. The loans we provide have extremely low default rates of just 2.5 per cent, he tells MEED.
Across Palestine, credit and deposit levels in the banking sector are growing. By the second quarter of 2013, residents deposits stood at $7.6bn compared to $5.7bn in 2008, according the Palestine Monetary Authority. Similarly credit facilities have increased to $4.3bn by the second quarter this year, rising from $1.7bn in 2008.
Yet, despite the expansion of the banking sector, the territorys economy continues to flounder. In September, the Washington-headquartered IMF said the territorys medium-term economic outlook was dim, with GDP set to slow.
But Shawa hopes to use his bank to not just generate profits but to reinvigorate Palestines beleaguered economy by reinvesting in community projects.
Shawa is also finalising plans for a new $20m fund aimed at supporting entrepreneurs. The aim is to launch the fund by May next year.
It is a really exciting way of doing venture capital and to engage banks at an early stage, he says.
As the bank continues to increase its lending activity, Shawa dismisses the idea that Palestine could risk facing a credit bubble in the near future.
Palestine has one of the lowest non-performing loan (NPLs) rates in the entire region of less than 3 per cent, which tells you something about the credit quality here.
In Palestine the loan to deposit ratio is 55 per cent for the entire banking sector. It is one of the most liquid banking sectors in the region, he says.
Looking to the future, Shawa sees the bank will continue to play a key role in generating wider economic benefits to Palestinian population.
The Israeli occupation poses a lot of restrictions on the Palestinian economy, having a political solution would unleash huge potential. But you dont sit and wait for politicians to deliver a peace deal. Instead, we keep working and trying to improve our businesses, he says.