While several institutional preconditions for financial access are set, awareness about and use of financial services remains at low level. The microfinance sector is growing steadily but many MSMEs remain underserved – are the current regulatory preconditions enough?
What's new from Palestinian Territories
Palestinian Territories – Financial Inclusion under difficult conditions

Within the Palestinian Territories only a little more than every third adult uses formal financial services. While this is higher than MENA average, a latest survey of 2016 revealed that not more than 15% of women participate in the financial sector. Remarkable achievements on the side of the financial infrastructure, financial education, consumer protection and regarding microfinance sector have been made. Policy makers are now focusing on financial inclusion of SMEs, deepened financial awareness leading to responsible financial decisions of individuals, and a stronger use of technology.

The Palestine Monetary Authority (PMA) regulates the microfinance sector since 2012. To date, it has licensed six institutions and supervises the growing sector. In late 2016, MFIs in the Palestinian Territories serve 87,000 active clients. To tap the prevailing credit provision gap for MSMEs, estimated to be around 600m USD, MFIs are getting ready to play a role but are currently limited in growth opportunities due to some regulatory framework constraints aiming at the stability of the institutions. This, and the potential provision of further services than loans, are on the watchlist of the regulator for the coming period.

The programme advises the Palestine Monetary Authority in developing and implementing strategies on financial inclusion. It supports them in their efforts to strengthen the legal framework and the supervisory capacities for the microfinance sector as well as consumer protection. Since 2017, the programme supports the enhancement of the PMA’s interface to financial sector clients, its Consumer Relation Halls, as a hub for individual advisory and general financial education.

Financial Inclusion in Numbers
Source: National Financial Inclusion Survey 2016
36.4%
Account Penetration (All Adults)
15.4%
Account Penetration (Women)
59%
(Very) Weak Financial Literacy
Achievements

With regards to financially inclusive policies and measures, the Palestinian Territories are in the fore front within the MENA region, with a track record including a very potent credit bureau, powerful credit guarantee and savings insurance schemes, as well as several institutionalized financial education measures. To continue this successful path, the Palestinian stakeholders have joined forces and developed a national financial inclusion strategy draft that combines sovereign and private sector initiatives under a common roof for the period until 2025 .

In the past years, the Palestine Monetary Authority has set up internal structures that are responsible and capable to supervise the microfinance sector. Since regulation has been gradually set, the sector has witnessed a significant transformation and consolidation: MFIs are today larger in size, are all registered companies, equipped with comparably high capital of minimum 5m USD and supported by international and national social investors with both debt and equity investments.

On the side of consumer protection, the PMA has set up an institutional and regulatory structure that improves consumers’ rights and their chances of enforcement. As part of the programme’s efforts, the regulator has developed a draft regulation to increase transparency and comparability in real costs of loans by forcing institutions to display the annual percentage rate.

Partners in Palestinian Territories
  • The Palestine Monetary Authority (PMA) is the emerging Central Bank of Palestine. Its overall Palestinian purpose is to ensure price stability and contribute to the stability and effectiveness of the Palestinian financial system. The PMA was initially established in 1994 by presidential decree as an independent institution and later by an act of the Palestine Legislative Council PMA Law Number (2) of 1997 which outlined the full authority and autonomy of the PMA. The PMA aims to foster its relationship with the banking system and other entities subject to its supervisory authority to advance the process of financial intermediation, and provide a regulatory environment that ensures the confidence of depositors and encourages financial institutions to develop a range of competitive financial services that will facilitate investment in Palestine.

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