Credit Guarantee Facility for the Private Sector to support Gaza recovery
Ramallah, April 8, 2015- The World Bank Group and the Palestine Monetary Authority (PMA) organized today a joint workshop to discuss the design of a new Credit Guarantee Facility (CGF) for the private sector in Gaza.
“The PMA and the World Bank Group have a long-standing partnership that aims to nurture private sector development for job creation supported by a sound and inclusive banking system. The Gaza war gave momentum to put more efforts in helping the recovery and the rehabilitation of the private sector, particularly small and medium enterprises,” said Dr. Jihad Al-Wazir, Governor of Palestine Monetary Authority. “We wanted to set up a facility that could help the Gaza businesses to overcome the challenges created by the recent war and to encourage the banking system to play its role while safeguarding the quality of their assets,” he added.
The CGF will place firms in a better position to negotiate loan restructuring and new loans with their financial institutions while contributing to the stabilization of the banking sector since credit risk will be shared with the CGF. It will facilitate lending for many firms who have lost collateral and have difficulty accessing financial resources. “The CGF will give the opportunity to borrowers whose loans were affected by the Gaza conflict to continue running their businesses. We see a great value to help the productive sector in Gaza, a key vector for economic growth and employment,” said Yousef Habesch, IFC Principal Country Officer, representing the World Bank Group. “
The World Bank Group has continuously advocated for a private sector led-growth in the Palestinian territories. The CGF will stimulate credit to support private investment in the reconstruction and recovery of Gaza. Given the scale of destruction and the severe economic situation in Gaza, spending pressures related to Gaza reconstruction are expected to significantly widen the Palestinian Authority’s financing gap. If supported by all parties, the facility can contribute to ease the burden on public finances.
Dr. Alwazir stated that “Despite the challenging environments, the Palestinian banking sector continue to perform well under the supervision of the PMA, acting as a central bank. The PMA continues to enhance its institutional capacity and provides rigorous supervision and regulation of the banking sector, consistent with international practice. The new facility would be implemented by existing partial credit guarantee facilities already operating in the Palestinian territories.
The CGF will adopt sound corporate governance principles, high standards of internal controls, particularly regarding risk management, and higher degree of professionalism. The World Bank Group, which assisted in the design of the facility, stands ready to support its implementation with advisory and technical assistance. The CGF is expected to be funded by the donor community.
“In many countries, credit guarantee facilities represent a key policy tool to address the financing gap of Small and Medium Enterprises. In a conflict affected country, the private sector can play a crucial role in development and alleviates the government fiscal burden,” said Pietro Calice, World Bank Senior Financial Sector Specialist. “We hope to be able to mobilize donor funds to set up and run the facility – this will be an important step towards the rehabilitation of firms in Gaza as well as efficient investment in the private sector as an engine for growth and employment.”