On December 12, 2022, the Japan International Cooperation Agency (JICA) signed an agreement with Bank of Palestine, a leading private financial institution in the Palestinian territories, to provide US$30 million in subordinated loans, and held a ceremony on February 16 to celebrate the signing. This project will be used to provide loans to small and micro businesses and will contribute to private sector development in the country.
In Palestine, small and micro businesses account for 97% of the number of enterprises and 87% of the number of people employed, and play an important role in the Palestinian economy. On the other hand, lack of access to finance poses a challenge to private sector development, especially for small and micro businesses. In addition, the Palestinian economic structure is fragile and the banking sector is subject to strict capital controls, which constrain the expansion of bank lending.
This project is JICA’s first overseas investment and loan for Palestine, and also JICA’s first support using a highly capital-intensive financing method, namely permanent subordinated loan with a conversion clause (Note 1). By strengthening the Bank of Palestine’s equity capital through this loan, JICA will contribute to improving access to finance for small, medium and micro businesses by expanding its loan portfolio. It is also expected that the loan will further support the development of small and micro businesses in Palestine, which JICA has been working on through institutional building and human resource development.
This loan will contribute to the Sustainable Development Goals (SDGs), Goal 8 (both job satisfaction and economic growth), Goal 9 (create the basis for industrial and technological innovation), and Goal 17 (achieve the goals through partnership). JICA will continue to provide financial inclusion support to people with limited access to finance, such as small and micro businesses, in Palestine and other countries around the world. JICA will continue to provide financial inclusion support to people with limited access to finance, including small and micro businesses in Palestine and other countries around the world.
(Note 1) “Perpetual subordinated loan with conversion clause”: A loan that is subordinated in the order in which claims can be collected compared to a regular loan, and that can be converted into common stock if certain conditions are met, thereby providing the same effect as a recapitalization for the borrower.
(Note 2) “2X Challenge: Financing for Women”: An initiative adopted by national development finance institutions, including JICA, at the G7 in June 2018. The 2X Challenge is an initiative adopted by the G7 in June 2018 by development finance institutions, including JICA, to mobilize US$3 billion by 2020 for projects that contribute to the economic empowerment of women, more than doubling the US$7 billion mobilized. 2X represents a goal to double the volume and impact of investments in women.
© Source JICA