With 21% of Palestinian workforce and altogether around 1.5 million Palestinian depending directly on public sector salaries, the emergency measures applied by the Palestinian Authority on salaries hits the Palestinian society and financial system at its Achilles’ Heel. A stress test for the PMA: Balancing the protection of clients and the financial system stability.
The phone is ringing, consumers are posting questions on the Facebook page, media requests are coming in: “What is my bank allowed to charge from me if I am suffering from a salary cut?”; “What are my legal rights to complain?”; “Is it possible to postpone instalments?”. A large series of requests by consumers has reached the PMA consumer protection team following the recent partial cut on salaries that the Palestinian Authority applied on public sector salaries. A real stress test for the consumer protection structures the PMA has introduced.
Public sector salaries are a major backbone of the Palestinian economy – even more crucial is their role in the financial sector: Public sector salaries are a most common collateral either directly or indirectly through guarantees for other loans. The recent further cut on public sector salaries in March 2019, which after the Gaza Strip now also hit the West Bank, thus has to worry the population, the economy and the financial sector alike. The event triggered the PMA to issue a circular demanding the financial institutions under their supervision to reduce loan instalments accordingly. This in turn led to a high uncertainty on consumers’ and financial institutions’ sides andis an application case for the PMA’s crisis management capacities.
It is those situations that make the difference in a financially included society: Equipped with a strong financial inclusion mandate and powerful consumer protection structures such as a dedicated market conduct team, regulations and procedures, but also the public consumer relations halls that offer advice and troubleshooting are jointly able to mitigate a good amount of the risk that is posed to consumers and the financial system alike.
See here more about the PMA’s consumer relations halls, which have been supported by the GIZ FIMENA project and the Sanad fund for MSME.