Palestinian officials encourage competition among banks

The Palestinian government in Ramallah will begin allowing Palestinian banks to compete with Bank of Jordan branches in the territories to collect citizens' payments for licenses and taxes owed to the Ministry of Transportation.

al-monitor Palestinian employees queue outside a cash machine outside the Bank of Palestine as they wait to withdraw their salaries, in Gaza City, Gaza, April 9, 2018. Photo by MAHMUD HAMS/AFP/Getty Images.

Sep 5, 2019

GAZA CITY, Gaza Strip — Palestinian banks soon will be able to compete to collect certain fees and taxes for the Ministry of Transportation's directorates in the West Bank.

The government made that decision Aug. 26 and gave the Ministry of Transportation two weeks to prepare an implementation plan and officially notify banks to begin the tax collection process. The decision is expected to go into effect in the next few weeks, Palestinian government Spokesperson Ibrahim Melhem told Al-Monitor.

Currently, the Bank of Jordan collects the monies through its employees stationed in the ministry's directorates. The change is designed to resuscitate the Palestinian economy, promote partnership between the private and public sectors, and improve government transparency. All 14 licensed Palestinian banks and their branches in Palestinian territories, including Gaza, will participate. Each bank will have the opportunity to offer its own conditions and incentives to attract customers.

The government said it hopes the switch will improve services to citizens and facilitate governmental transactions. Eventually, more ministries will be involved, but the Transportation Ministry was chosen to be the first because it is among the ministries that pump the most funds into the government's treasury.

Wael Rashed, director general of financial affairs at the Transportation Ministry in Ramallah, told Al-Monitor the ministry has 13 main directorates and two subdirectorates in the West Bank. Together, they collect as much as 300 million shekels ($85.7 million) annually.

Melhem told Al-Monitor that this step aims to prevent the Bank of Jordan from monopolizing the collection service and allow citizens to settle financial fees at any Palestinian bank.

In 1997, the Palestinian government signed an agreement with the Bank of Jordan's Palestine branch under which the bank now collects revenues for the ministry's directorates in Palestinian governorates. The agreement, which is renewed annually, remains applicable.

Mahmoud Daras, central operations director at the Bank of Jordan, told Al-Monitor the government had not officially informed the bank of its decision to open the door for other banks to collect the money. However, he said his bank welcomes the competition, which encourages all banks to offer better services to Palestinian citizens.

In August 2014, the Transportation Ministry in the West Bank raised the Bank of Jordan's commission on each transaction performed by bank employees in their offices within the ministry's directorates from 1 shekel ($0.28) to 3 shekels ($0.85). Thousands of citizens visit these directorates daily to conduct their business.

Ahmad Jaber, head of the Transportation Syndicate in the West Bank, told Al-Monitor he also welcomes the Palestinian government’s decision, which he expects to benefit the banks and result in better, even if limited, services for public and private transport drivers.

He noted that there are 228,000 vehicles in the West Bank, including 9,488 used as private taxis or for public transport. License fees, he said, are lucrative for the government. Taxi drivers, for instance, pay 660 shekels ($188) for their licenses. These do their paperwork every six or 12 months and currently settle their fees solely through the Bank of Jordan

In June 2018, the Palestinian government approved the national plan to promote the use of electronic payments in daily transactions and commodities purchases. Banks made tempting offers, such as points and rewards, for citizens who use the electronic payment system.

But Bakr Eshtayyah, an economics professor at An-Najah University, told Al-Monitor that although the government's new plan will indeed open up competition, customers won't be the primary beneficiaries.

“Palestinian banks will benefit the most from the government decision because they want the commission that citizens pay. Meanwhile, citizens will benefit the least financially," he said.

Eshtayyah called on the officials to reduce the fees consumers must pay for government transactions.

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