- $50 million to help strengthen resilience of Palestinian economy amidst the COVID-19 crisis
- Part of Team Europe Initiative to provide rapid response to coronavirus outbreak
The European Investment Bank (EIB) and Bank of Palestine join forces to support the resilience of the Palestinian private sector with a $50 million line of credit made available to Bank of Palestine to be on-lent to local private businesses, focusing on small and medium-sized enterprises (SMEs).
The operation is part of Team Europe’s overall response to the COVID-19 crisis, which aims to support the sustainable social and economic recovery of the region. It also falls under the EU-EIB Economic Resilience Initiative (ERI), which amongst its primary objectives intends to promote private sector development through support to SMEs as key players for generating economic growth and employment opportunities in Palestine.
Flavia Palanza, Director of the EIB’s Neighbouring Countries Department, commented on the signature of the new financing agreement, “Our new line of credit comes at a time when SMEs need strong support to overcome the challenges and the shortfall of liquidity created by the COVID-19 pandemic. SMEs are most vulnerable to the impact of this global crisis. We are proud of our partnership with Bank of Palestine and the tangible impact that our project will have on people’s lives in the country.”
The EIB funding is being made available as part of a package, including a comprehensive technical assistance programme and a risk-sharing instrument supporting a portfolio of €50m of loans to SMEs, to be provided under the EU’s European Fund for Sustainable Development (EFSD). These instruments aim to promote access to finance for SMEs in general and financial inclusion of underserved and vulnerable groups of the economy, including SMEs impacted by the COVID-19 crisis, startups, women- and youth-owned businesses.
Prime Minister Dr Mohammad Shtayyeh said during the signing ceremony: “This is a significant, timely agreement that intersects with the Palestinian government’s goals and priorities to support and strengthen the private sector, especially SMEs that have been affected by the COVID-19 pandemic. We thank the European Union and the European Investment Bank for this strategic partnership. Europe has always been on the side of Palestine politically while providing economic support and building its institutions, in order to establish an independent and sovereign Palestinian state along the 1967 borders with East Jerusalem as its capital.”
The European Union Representative Sven Kühn von Burgsdorff said: “Six months after the first meeting of the EU-Palestine Investment Platform, I am very pleased to witness today a historic signature ceremony dedicating support to the Palestinian private sector with an unprecedented amount of finance via innovative instruments. This support comes during a period when Palestine is going through a difficult time and it demonstrates that in spite of the many challenges it faces, Palestine does offer viable business opportunities worth investing in. This package of financing will contribute to strengthening the Palestinian economy, contributing to economic independence, prosperity and welfare.”
Mahmoud Shawa, CEO of Bank of Palestine, said: “As leaders in SME lending, Bank of Palestine is proud to be working with Team Europe and the EIB in providing additional liquidity to the SME sector in Palestine. This additional liquidity coupled with technical assistance and risk-sharing components comes at an important time to help this important sector recover and regain economic resilience. We are appreciative of the efforts of the European Union and the partnership with the EIB during this particular period. With this loan, we shall service all our SME sectors focusing on those most impacted due to the COVID-19 pandemic.”
The EIB operations are part of a comprehensive package of economic assistance that the European Union allocated to support the Palestinian economy in its recovery from the COVID-19 crisis. The overall package amounts to around €85 million of EU funds, which is expected to mobilise over €400 million in soft loans and investment for the Palestinian private sector. The bulk of this assistance is to be channelled to the Palestinian economy through EU financial institutions and will reach the private sector via local banks and microfinance institutions.
SMEs are the backbone of the Palestinian economy as they account for over 95% of local businesses, contribute more than 55% to the GDP, and employ 85% of the active working population. As a consequence of the COVID-19 outbreak, many companies have experienced a decrease in turnover and profitability, leading to payment delays and an increased demand for liquidity. It is now crucial to step up support to private sector businesses, thus helping to protect jobs and keep the economy going.
Bank of Palestine is the largest bank in the country with a market share in total assets, loans and deposits of 30%, 35% and 30%, respectively. It offers a comprehensive range of financial services to its customers, including retail, microenterprises, SMEs, and corporates.
The European Investment Bank (EIB) is the European Union's bank. It is the long-term lending institution of the European Union and the only bank owned by and representing the interests of the European Union Member States. The EIB works closely with other EU institutions to implement EU policy.