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High Liquidity for Lebanese Banks in Iraq Investment Opportunities Are Available and BBAC Proceeds at Steady Pace!

Aug. 05, 2020

The withdrawal of a number of Lebanese banks from the Iraqi market didn’t go unnoticed as some are still concerned about this matter, given the importance of Lebanese investments in Iraq whether in the banking sector or in the other economic sectors. However, the fear of the remaining banks on the market is dissipating, which was confirmed by the Assistant General Manager for External Expansion at BBAC, Chawki Badr, during his interview with the daily newspaper “An-Nahar”.

The Lebanese banks working in Iraq have been able to establish their presence in this country, whether in terms of the volume of deposits that exceeded USD 1.3 billion at the end of 2019, or in terms of their effective contribution in the foreign trade finance transactions such as opening letters of credit, issuing external guarantees, making transfers, and strictly adhering to the requirements of the Law on Fighting Money Laundering and Terrorist Financing.

Well informed about the state of the Lebanese banking sector in Iraq and the measures taken by the Central Bank of Iraq, Badr says that “some of these banks strongly entered the Iraqi market for their belief in the availability of suitable opportunities for investment, while others waited and entered reservedly to assess the market and to seek the available investment opportunities”.

He considers that “the decision of withdrawal of some banks was taken after finding out that the current conditions won’t allow them to continue working and meeting the new requirements of the Central Bank of Iraq. Although, it was possible for them to act in accordance if they have decided to continue to work inside Iraq. As for BBAC, we are staying in the country and we will continue to provide all banking services to our customers”.

Requirements of the Central Bank of Iraq

What are the new requirements of the Central Bank of Iraq, and were they a factor behind the withdrawal of some Lebanese banks from Iraq?

The Central Bank of Iraq, pursuant to circular number 9/2/449, issued on 11/11/2019 new instructions attached to previous ones regarding the balances of Iraqi banks including foreign banks abroad.

Badr explains that the Central Bank of Iraq allowed the deposition of only 30% of the total bank deposits in foreign currency outside Iraq or 20% of its capital and reserves according to the higher number, and to maintain 70% of deposits or 80% of the capital inside Iraq, provided that the value of external guarantees and confirmed letters of credit are beyond the above proportions”.

 “The above proportions were amended later to become 50% of the value of external guarantees and letters of credit (confirmed and not confirmed), he adds. “It excludes also the investment in the international bonds of the Iraqi Government circulated in American dollar from the ceilings on the external balances, and the deadline for compliance with these instructions was set for no later than 31/12/2019. These instructions were respected in general and within the given deadline”.

So what are the recent challenges?

Badr indicates that “with the downgrade of Lebanon’s sovereign credit ratings to SD, the Central Bank of Iraq issued on 21/5/2020 new instructions specifically directed to Lebanese banks under the number 9/2/159 requesting accordingly the immediate transfer of the value of the excess of 30% of the deposits or 20% of the capital of the external balances into Iraq and the transfer of the complete value of the external account balances to correspondent banks whose credit rating is not less than B, by allocating a sub account from the parent bank accounts, dedicated to the branches of Iraq; which means not allowing to deposit any sum at the parent bank in Lebanon due to the downgrade of the sovereign credit rating below B”.

“The instructions comprised also the need to capitalize the realized profits for the Lebanese bank branches in Iraq for the years 2021, 2020 and 2019 in order to enhance its operating capital of USD 50 million per bank, and not allowing their transfer to the parent bank, and the application of the operating capital of the branch in Iraq in evaluating the basic financial indicators.”

Badr points out that “the Lebanese banks haven’t encountered any difficulties in implementing these instructions, although the last condition would limit their activity in granting credits. For example, if the capital of a bank is USD 600 million, it can lend to the single customer or the interconnected group USD 60 million as a maximum that represents 10% of its capital according to the instructions of the Central Bank of Iraq, while the maximum loan amount is now and after the last instructions USD 5 million that represents 10% of the operating capital of the branch in Iraq of USD 50 million”.

Budget of Foreign Branches

The measures don’t end at this point, after they made an important decision related to the volume of budget of the foreign bank branches working in Iraq. Hence, Badr says: “The decision requires that the budget should be at least equivalent to the value of the capital of the Iraqi Bank, amounting to 250 billion Iraqi dinars, equivalent to USD 210 million, within a maximum period at the end of 2021. This measure may have been a motive to a number of Lebanese banks to consider withdrawing from Iraq, but I guess that the Central Bank of Iraq will be flexible with this requirement by extending the deadline until after the end of 2021 for the banks that are willing to continue and prove their seriousness by increasing their business volume”.

How did BBAC manage to meet the requirements of the Central Bank of Iraq to continue working on that market?

“We will continue working in Iraq and meeting the requirements”, Badr affirms. “We have already adhered to the required procedures, and even the volume of the budget required to be secured by the end of 2021 is currently available and more than doubled, especially that our bank is ranked first among the Lebanese banks in Iraq in terms of total assets and value of net profits. We recently signed an agreement with Credit Libanais bank to own its portfolio following their withdrawal from Iraq, and we are currently holding discussions with other Lebanese banks in this regard”.

Expansion Projects

For the expansion projects in Iraq, the entry of BBAC in 2009 into the Iraqi market marked a quantum leap that yielded fruitful results. In this context, Badr announces that they will continue to develop their business and expansion plans as they are heading to “open a new branch in Erbil in addition to the current branch and our two branches in Baghdad and Sulaymaniyah, besides a wide network of ATMs that comprises 14 machines to meet the needs of the market”. Badr reveals that “the bank is looking to expand in other Iraqi governorates given the presence of different fields of work and promising investment potentials”.

Hence, BBAC will proceed its business in Iraq at a steady pace while looking forward to the available opportunities and prospects, in order to achieve more successes.

محمد-الإتربي

MSMEDA, Banque Misr sign EGP 500m worth microfinance contract

Published 05 Oct,2020 

The Micro, Small and Medium Enterprises Development Agency (MSMEDA) and Banque Misr have signed a microfinance contract of EGP 500m to support micro-projects across Egypt.

The contract was signed by Minister of Trade and Industry and MSMEDA Executive Director Nevine Gamea and Banque Misr Chairperson Mohamed El Etreby.

It comes as part of the World Bank agreement entitled “Stimulating Entrepreneurship to Create Jobs”.

Gamea said the contract comes in accordance with the Egyptian government’s directives that MSMEDA coordinates with various development partners to support micro-projects in Egypt.

It will support the Central Bank of Egypt (CBE) and Egyptian Federation for Microfinance initiative to expand the provision of funding to NGOs and micro companies. This aims to help them provide their financial services to the largest number of citizens.

Gamea pointed out that the agency’s activities and its various plans take into account the particular focus on women and youth to ensure they are economically empowered.

The percentage of projects allocated to women in this contract stands at about 30% of the total funding. About 10% is directed to women over the age of 35, and 30% to youth aged between 21-35 years old.

The minister indicated that EGP 50,000 will be granted per loan, and that about 33,000 micro-projects will be funded during the project’s implementation across the country.

She praised the cooperation in the microfinance field between MSMEDA and Banque Misr, which began in 2011. The total number of contracts that the two sides have signed currently stands at about EGP 1.3bn, through which 205,000 micro-projects received EGP 2.5bn through the bank’s branches.

Mohamed El Etreby said that Banque Misr attaches great importance to the small, medium, and micro enterprises sector, by providing all financial and non-financial services to meet the needs of this sector’s clients.

He explained that Banque Misr is one of the first banks that adhered to the requirements of CBE and reached 20% of the bank’s credit portfolio, with its positive impact on the national economy, indicating that this coincides with the directives of CBE and the state’s efforts to advance in this sector, to improve economic indicators, increase economic development rates, encourage local products, and reduce the import bill.

الشيبي

QIIB awarded prestigious Certificate on Information Security for 5th year in a row

For the fifth consecutive year, QIIB has been awarded the highest certificate in the protection of banking cards data also called the Payment Card Industry Data Security Standard v 3.2.1 (PCI-DSS), granted by SISA, a Forensic driven Cyber security specialist company headquartered in Bengaluru, India.

This certificate is of particular importance given the unusual circumstances that the world is facing this year and the increasing challenges in combating attempts to hack and avoid scams as well as the customers’ growing dependence on payments via bank cards.

On the occasion, QIIB Chief Executive Officer Dr. Abdulbasit Ahmad Al Shaibei said: “We are pleased to meet the exceptional standards in the protection of our customers’ data. QIIB invested heavily in cybersecurity and its various solutions. Being awarded the PCI-DSS certificate proves that we are on the right track. We will continue to focus greatly on this aspect, which is deemed crucial for our banking operations and our various banking channels.”

He said, “Interest in providing technological solutions is no longer a luxury, but rather an urgent need that must be met constantly, while adopting the highest security posture and take advantage of the achievements made in the field of cybersecurity to protect from hacking attempts and electronic crimes, which unfortunately are becoming increasingly complicated and are target various facilities and institutions. Thus, our response should be above par, so as to protect the data of our customers and the security of our transactions in accordance with the highest standards”.

Dr. Al Shaibei affirmed, “QIIB assures its customers that the security of all their data and transactions is at the top of our priorities, in line with the best global standards, so as to serve the interest of our customers, enhance mutual trust and provide a safe technological environment for the prosperity of the local business environment”.

QIIB CEO thanked SISA, the leader in information security and customer data protection, stressing that the bank will continue to work closely with the company in order to benefit from its expertise and solutions in the field of cybersecurity.

SISA CEO and Founder, Dharshan Shanthamurthy, said: “Congratulations to QIIB’s team on achieving PCI DSS certification. Maintaining such an exhaustive international benchmark is not a one-off activity but an ongoing process.”

QIIB was established in 1990 as the second Islamic bank in Qatar and is currently the third largest Islamic bank listed on the Qatar Stock Exchange in terms of assets and market value. The bank has several regional and international partnerships and was able to make a qualitative leap in the development of its technological structure and alternative channels, thus enhancing the banking services its provides to the next level.

This certificate is of particular importance given the unusual circumstances that the world is facing this year and the increasing challenges in combating attempts to hack and avoid scams as well as the customers’ growing dependence on payments via bank cards.

On the occasion, QIIB Chief Executive Officer Dr. Abdulbasit Ahmad Al Shaibei said: “We are pleased to meet the exceptional standards in the protection of our customers’ data. QIIB invested heavily in cybersecurity and its various solutions. Being awarded the PCI-DSS certificate proves that we are on the right track. We will continue to focus greatly on this aspect, which is deemed crucial for our banking operations and our various banking channels.”

He said, “Interest in providing technological solutions is no longer a luxury, but rather an urgent need that must be met constantly, while adopting the highest security posture and take advantage of the achievements made in the field of cybersecurity to protect from hacking attempts and electronic crimes, which unfortunately are becoming increasingly complicated and are target various facilities and institutions. Thus, our response should be above par, so as to protect the data of our customers and the security of our transactions in accordance with the highest standards”.

Dr. Al Shaibei affirmed, “QIIB assures its customers that the security of all their data and transactions is at the top of our priorities, in line with the best global standards, so as to serve the interest of our customers, enhance mutual trust and provide a safe technological environment for the prosperity of the local business environment”.

QIIB CEO thanked SISA, the leader in information security and customer data protection, stressing that the bank will continue to work closely with the company in order to benefit from its expertise and solutions in the field of cybersecurity.

SISA CEO and Founder, Dharshan Shanthamurthy, said: “Congratulations to QIIB’s team on achieving PCI DSS certification. Maintaining such an exhaustive international benchmark is not a one-off activity but an ongoing process.”

QIIB was established in 1990 as the second Islamic bank in Qatar and is currently the third largest Islamic bank listed on the Qatar Stock Exchange in terms of assets and market value. The bank has several regional and international partnerships and was able to make a qualitative leap in the development of its technological structure and alternative channels, thus enhancing the banking services its provides to the next level.

د الهاشل

Mohammad Y Al-Hashel: Lives and livelihoods, a delicate balance

Speech by His Excellency Dr. Mohammad Y Al-Hashel, Governor of the Central Bank of Kuwait and Chairman of the Higher Steering Committee for Economic Stimulus, Kuwait, 4 June 2020.

Taken aback by a pandemic the world had not seen in seven decades, we are left with no choice
but to do our best to protect lives. Hurriedly and feverishly imposed measures, as extreme as
total lockdowns, brought about the worst global recession since the Great Depression of the early
20th century. Forecasts suggest a drop of 3-5% in gross domestic product, while growth in Europe
is forecast to go down 8-12%. With unemployment hitting unprecedented highs, 1.6 billion
workers are negatively impacted by the pandemic. The International Labor Organization expects
a loss of around 305 million full-time jobs in the second quarter of 2020, and estimates that one
of six young people is now out of the job market as a result of the pandemic. And as companies
continue to suffer, more are going out of business and this phenomenon would blow up even
further. The Organization expects that the “Lockdown Generation” would face even higher
unemployment and lower pay for the next five years. These factors combined lead to uncertainty
regarding the true extent and severity of the crisis, causing fear and panic among consumers,
investors, and the business sector as a whole, intensifying further the economic and social impact
of the pandemic.

Mr. Rifai

Suez Canal Bank to launch EGP 250 mn money market fund this month

Suez Canal bank to launch EGP 250 mn money market fund this month: The Suez Canal Bank will this month launch its first money market fund, Suez Daily, with EGP 250 mn in capital, the local press reports. The fund will offer daily subscriptions in short and medium-term financial instruments including bonds, treasury bills, bank deposits, and savings certificates, Chairman and Managing Director Hussein Rifai said.

CI Capital Asset Management, CI Capital Holding’s subsidiary, will manage the fund.

Wissam Fattouh photo

Announcing a Regional Office for the Union of Arab Banks in the Kingdom of Saudi Arabia

The Secretary General of the Union of Arab Banks, Wissam Fattouh, announced the establishment of a regional office for the Union in the Kingdom of Saudi Arabia at the King Abdullah Financial District in Riyadh, after the decision of the Saudi Council of Ministers headed by the Custodian of the Two Holy Mosques King Salman bin Abdulaziz, may God preserve and protect him, and the authorization of His Highness, the Minister of Foreign Affairs, Prince Faisal bin Farhan bin Abdullah Al Saud, may God protect him, or his representative, to take the necessary action to sign a “Headquarters Agreement” with the Union of Arab Banks to establish a regional office in the Kingdom.

After he met with the Saudi Ambassador in Lebanon Walid Bukhari at his residence in Yarzeh, Fattouh expressed the gratitude of the Union of Arab Banks, its President Sheikh Muhammad Jarrah Al-Sabah, the Vice-President of the Union, Professor Muhammad Mahmoud Al-Etribi, and the members of the Board of Directors, to the Kingdom and for the efforts made by Ambassador Bukhari and the Saudi Arabian Monetary Agency (SAMA).

He said: We offer great respect and appreciation to the Custodian of the Two Holy Mosques King Salman bin Abdulaziz, may God protect him, and from His Royal Highness Crown Prince Mohammed bin Salman, may God protect him, and everyone who contributed to the delivery of this project to completion and we will inform all Ministries of Economy, Arab Chambers of Commerce and all our Arab banks, that the Union has established a regional center in the Kingdom of Saudi Arabia, which will form a communication bridge among the economic, financial and monetary authorities in the Kingdom.

Fattouh added that the new office will work within a strategy aimed at strengthening and developing commercial and banking relations between the Kingdom and the Gulf countries, and other Arab countries, especially working to raise the level of commercial and banking relations between Lebanon (the UAB headquarters) in addition to developing a wide-ranging investment strategy for the participation of our Arab banking sector represented by our banks. Members of the Union (360 banks) and other Arab financial institutions and companies are investing in the 2030 developmental vision, including renaissance development projects in the Kingdom.

OsloCreditwilliam87-1680x600

Norway: An Economic Model for Oil and Gas Producing Countries

Overview

Norway is a success story that is repeatedly pictured as a role model for a socialist-capitalist mixed economy done right.

According to the International Monetary Fund (IMF) 2018 rankings, the country had one of the highest GDP per capita in the world (Rank 4: $81,995 PP) falling only behind Luxemburg, Switzerland and Macau (with a PPs of $114,234 – $82,950 – $82,388 respectively).

The country has a strong trade surplus (Net exports value $17.67 billion – 2019 data), one of the highest national life expectancies (83 years according to the World Health Organization 2018 data), an highly skilled workforce with one of the highest proportion of University graduates (42% according to OECD tertiary education graduates to total population between ages 25-64), a very low unemployment rate (0.41% according to OECD 2016 data) and international recognition as a place that is very easy to do business in (Global Rank 7, according the World Bank Group 2019 Ease of Doing Business Index).

What is more remarkable is that Norway has achieved this while also being one of the most economically equal countries in the world. After taxation, a Norwegian resident from the bottom 20% of income earners in Norway, still earns on average about a quarter of what their top 20% income earners would. This is relatively high compared to the OECD average which has its top fifth owners making an income 10 times that of their bottom fifth counterparts, making the four-times disparity between Norway and OECD countries remarkable.

Working conditions in Norway also portray a successful aspect of the country. Norway has exceptionally robust workers’ protection; meaning that social issues like working long hours or people needing second job to support themselves is particularly rare. In this regard, in Norway, the OECD 2018 Better Life Index (workers working 50 hours a week and more) notes that only 3% of employees work more than 8 hours when compared to the OECD average of 11% or the American average of 33%. All of this contributes to the citizens of Norway being some of the happiest in the world.

What is the secret for this success case?

Norway by all standards is a model that citizens around the world would want to replicate in their own countries. So why haven’t other countries adopted similar economic policies to those in Norway?

In fact, Norway wasn’t always this prosperous. Back in the 1960s, Norway was an economy mainly based on fishing. All started to change in May of 1963, when the Norwegian government asserted sovereign rights over natural resources in the North Sea. This was basically the government saying that that specific part of the ocean is for them, and if oil happens to be found there, it would be owned by Norway. In 1969 a ship called the “Ocean Viking” struck oil in the North Sea, and from that point, oil production in the region boomed, where Norway produced more than 1.6 million barrels a day at that time.

By mid-1970s, Norway produced more oil per capita (313,000 barrels/day/pmp) than any other country in the world. Even today it is only surpassed by Kuwait (721,575 barrels/day/pmp) the United Arab Emirates (335,103 barrels/day/pmp) and Saudi Arabia (324,866 barrels/day/pmp).

The Norwegian government was extremely prudent with the revenues from these scarce resources (oil). The oil boom caused Norway’s GDP to grow over five times in the 1970s (from $12 billion to $65 billion in this period). But this newfound wealth was not being generated through private companies like Exxon and BP, but rather through a publicly run and owned company called “Statoil”. This meant that the profits from oil and natural gas sales were not going to fill the pockets of private shareholders, but rather go directly to the government. This made the Norwegian government rich overnight, giving them, in theory, the ability to freely spend on public goods and services such as construction, modernizing cities and on public infrastructure while also reducing taxes similar to other oil-rich countries. However, Norway didn’t. Income and business taxes in Norway are still among the highest in the world.

Fortunately for Norway, the government had the foresight to realize that the oil is not a permanent asset and that the citizens of Norway would not be satisfied if they had to go back to fishing in a generation time. To this end, the authorities invested the returns of oil into what is called a Sovereign Wealth Fund. Today, this has become the largest Sovereign Wealth Fund in the world ($1.002 trillion), beating out China’s Investment Corporation ($941 Billion), which is remarkable, considering that China has a population 270 times larger than Norway.

A Fund for the People of Norway!

This is a fund that belongs to the people of Norway. The rationale is that this oil and these natural resources were originally the property of the Norwegian people, so it is the citizens who should receive the revenue from the oil revenues. This means that every man, woman and child who is a citizen of Norway essentially has around $200,000 invested into this giant hedge fund. However, in reality this money is not easily accessible by these citizens to spend on luxury goods. The money itself is actually not even accessible to the Norwegian government. In fact, only the profit generated from these Investments is used to fund things like education, a strong welfare system, public infrastructure and reinvestment into the fund itself.

In 2017 the fund made $131 billion returns from its investments. This fund is a very diverse portfolio of stocks, bonds, cash and commodities, but what it does invest in, is not nearly as interesting as what it does not invest in. The Norwegian government has set-up an ethical council to oversees the investing decisions and it has excluded investing in things like weapons manufacturers, tobacco companies and companies that have caused severe environmental damage and companies that have breached workers’ rights, the fund is also forbidden to invest in fossil energy companies. This means that all the investments this fund are in foreign companies.

Despite the massive political power that the fund gives Norway to influence foreign companies it also means that the fund’s performance is independent of the Norwegian economy. This fund was an extraordinary piece of thoughtful decision by the Norwegian policy makers and practically means that Norway is now the national equivalent of the person who wins the lottery, keeps his day job and invests his money into a stock portfolio.

The story of Norway, can be an inspiration for many countries currently discovering oil and gas, especially in the Mediterranean Sea. The strategy and policies Norway has adopted are worth studying and taking into consideration.