Palestine Country Profile: The Road Ahead for Palestine: Financial Policies Issues

Abstract

In spite of the general unstable political and economical situation that existed in Palestine, the financial sector has witnessed a positive increase in the last ten years. It consisted of four groups: First: The banking system, which includes 22 Arab, foreign, and Palestinian banks with 135 branches (PMA, 2005). Second: Insurance sector, which includes nine insurance corporations. Third: Other financial institutions including moneychangers and microfinance firms. Fourth: The Palestinian stock exchange market dealing only with par- value common shares of 25 Palestinian corporations and one foreign corporation, among six private corporations operate as registered brokers. The size of banks operation in Palestine has grown significantly, as expressed by owner equity and total assets in the last decade. However, in spite of the significant increase in credit advances during the last period, it is still low compared to the value of deposits held by the banks. As for deposits, they have increased to $ 3976 millions in February 2005, which is equivalent to 90% of the Palestinian GDP, and it is more than most of the Arab states. Finally, various recommendations may be drawn regarding financial policy in Palestine. For example, to consider investments in local corporations as a part of the minimum requirements of credit to deposit ratio by the PMA, to encourage banks to invest in both primary and secondary markets in Palestine, to change the present legal entity of the PSE to a non -profit organization owned by insiders known as stakeholders, to issue the proposed law of companies.