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Gaza banks face uncertain future as reconciliation deal progresses

The banks and other financial institutions that have long operated in Gaza under the Hamas government are finding themselves left out of the Palestinian reconciliation.

GAZA CITY, Gaza Strip — Despite the efforts by Fatah and Hamas to seal the Palestinian reconciliation deal and the concessions offered by Hamas, some issues that went undiscussed during the Egyptian-sponsored rounds of dialogue in Cairo remain outstanding.

After the Hamas takeover of the Gaza Strip in 2007, two banks were established to jump-start the economy in the Gaza Strip and disburse the salaries to the employees of the de facto government in Gaza, accounting for around 45,000 civilian and military employees.

The Palestine Monetary Authority (PMA) — the Palestinian Authority’s central bank — refused to deal with the government in the Gaza Strip and still has yet to recognize the Palestinian Production Bank established on May 29, 2013, and the Islamic National Bank established on April 21, 2009. The banks were opened with contributions from Arab businessmen with the approval of the Hamas government. The Palestinian Production Bank was established with a capital of $20 million, far less than the amount required by the PMA, set at $60 million.

That banks have not reached the agenda of the reconciliation dialogue has sparked fears and concerns among the Gaza Strip employees as well as among citizens and investors who depend on these banks, which are not legally recognized by the PMA.

In 2013, the PMA called on all citizens to avoid these unrecognized banks and institutions, absolving itself of liability for any losses that may result from doing business with them.

In its statement, the PMA declared the Palestinian Production Bank had failed to apply for a "license to initiate banking business in accordance with the provisions of the Palestine Monetary Authority's Law No. 2 of 1997 and Banks Law No. 9 of 2010.”

The staff members of the Palestinian Production Bank and the Islamic National Bank are concerned over the PMA’s continued refusal to legally recognize them on the grounds of insufficient capital. They fear this policy will push away shareholders and customers.

Bank employee Karim Darwish told Al-Monitor, “I have been working at the Palestinian Production Bank for three years. I know that my fate and the future of my job remain unknown because many banks and money markets are not allowed to deal with the bank I work with, based on the statement by the PMA warning citizens and banks not to do business with it.”

He pointed to the significant negative impact that the Palestinian reconciliation will have on the bank if the PMA takes no action to prevent it. He explained, “The Palestinian Production Bank depends on the financial transactions of the Hamas government's employees and institutions. The bank would be affected if these employees and institutions transfer their accounts to other banks recognized by the PMA and therefore can offer better loans and other services.”

The director of public relations and media for the Palestinian Production Bank, Khalil Khalidi, told Al-Monitor, “The bank operates under the law and within the framework of the Banking Law No. 9 of 2010 to protect the funds of depositors and shareholders and mitigate risk. The bank was recognized by the Ministry of National Economy in the Gaza government, after the PMA’s categorical refusal to recognize it or do business with it in light of the division between the two parts of the country.”

He added, “The bank’s management is still making daily contacts with all concerned parties and seeking to negotiate with the PMA to gain recognition. Being recognized by the PMA would improve its economic and financial situation and boost its local and international transactions.”

Khalidi noted, “The bank seems to be facing an ultimatum. To overcome its dilemma it has to pick one of two options. It can increase its capital — as required by the PMA to be recognized — by attracting more shareholders and affluent customers, or merge with other banks.”

He called on the concerned authorities and the national consensus government to support the bank and its 85 employees, who are the breadwinners of their families, amid Gaza's dire living conditions and lack of job opportunities.

Moein Rajab, an economics professor at Gaza's Al-Azhar University, told Al-Monitor, “The understandings between Fatah and Hamas should cover the banks and insurance companies that were established during the division and that struggled under harsh economic conditions as a result of the PMA restrictions. They employ hundreds of Palestinians, and it is time to grant them equitable treatment to improve their economic and financial situation.”

He explained, “The Ministry of National Economy in the Gaza government is the main body authorized to negotiate and reach understandings with the PMA,” adding, “These banks and institutions must be deemed public institutions, and the Palestinian people must be entitled to work with them with no conditions or restrictions whatsoever.”

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