Access to efficient financial services is essential for personal economic growth and a country¡¯s economic development. Even more so during times of crisis when digital payments can be a lifeline. In the West Bank and Gaza, significant strides were being made to modernize payment systems and enhance financial infrastructure. However, since October 7th, 2023, the financial system and its infrastructure has suffered significant disruptions and damages. It becomes increasingly imperative to develop the digital financial services and build upon the significant advancements facilitated by the World Bank over the years.
ľ¹ÏÓ°Ôº and United Nations Interim Damage Assessment updated to July 2024 figures estimates USD 14.2 million in damages to the financial sector in Gaza between October and the end of January 2024. This includes the damage or destruction of 93 percent of bank branches in Gaza, as well as 88 percent of micro finance institutions, most money changers, and 88 percent of insurance companies. Only three of the 94 automated teller machines (ATMs) are currently operational, and the only payment service provider (PSP) branch in Gaza has been partially destroyed. As a result, the people of Gaza are struggling to pay for simple goods and services, including food and medicines. In addition, the impact to the banking system is hindering the efforts of the private sector to resume production of goods and, ultimately, the creation of jobs and payment of employees. The ongoing conflict has also significantly affected the freedom of movement and access to financial services across the West Bank.
Improving the payments infrastructure
In recent years, by leveraging international best practices, the World Bank has been working to provide technical assistance to the Palestine Monetary Authority (PMA) to help reduce transaction costs, widen financial access, and boost the use of digital payments. The Bank has been collaborating on key initiatives with other development partners including the German Corporation for International Cooperation (GIZ) on the West Bank and Gaza Digital Finance project (2021-2024), and the Micro, Small, and Medium Enterprise (MSME) Technical Assistance Facility for the Middle East and North Africa (2022 to 2025), which are expected to help advance digital financial services and access to finance for MSMEs. The Bank is partnering with the European Union Support for the Palestinian Economy and Resilience program, which will be implemented from 2024 to 2026 and will focus on contributing to the stability, accessibility, and sustainable development of the financial sector.
ľ¹ÏÓ°Ôº has contributed to the implementation of the new Fast Payment System (FPS), locally called ¡®iBuraq¡¯ system, the national quick response (QR) code standards, and the National Bill Presentment and Settlement System, locally called ¡®E-Sadad¡¯. As well as assisting the PMA in putting together an Oversight Policy Framework and an Implementation Roadmap, establishing a foundation for comprehensive oversight that includes risk management and governance. Key achievements included a two-week capacity-building program in late 2021, and the completion of the payments Oversight Policy Framework in April 2023. This framework and the capacity-building initiatives aimed at improving the oversight capabilities of the PMA, contributing to a more stable and efficient payment system.
ľ¹ÏÓ°Ôº has also been working on actively strengthening the financial sector¡¯s cybersecurity and business continuity capabilities in the West Bank and Gaza through a comprehensive supervisory framework, and providing supervisors with detailed checklists that address key areas such as IT governance, cyber risk, information security, and business continuity management, which are crucial for overseeing information systems, including payment systems and the supervision of telecommunication and technology service providers. An activity that has been imperative in a time of significant stress on business continuity.
Impact and next steps
The concerted efforts by the World Bank in support of the PMA are paving the way for a more resilient, accessible, and modern financial environment that promises to empower the people of West Bank and Gaza with greater financial stability and resilience.
ľ¹ÏÓ°Ôº will continue to push for the advancement of digital payments in the West Bank and Gaza through working with regulators to develop fast payments, e-KYC (electronic Know Your Customer), QR code use cases. To address some of the repercussions of the current crisis the World Bank is also studying the adoption of direct debit and looking at options for advancing digital payment methods. The recent PMA measures on digital payments are a good example of how the PMA could build on the payment infrastructure that the World Bank helped advance to alleviate the effects of current crisis, and how digital financial services can show resilience in times of crisis. Where digital financial services have been imperative to the continuation of services in the West Bank as freedom of movement is limited, and humanitarian agencies have partnered with PSPs to deliver some cash assistance to Gazans through e-wallets in recent weeks. Going forward, the financial sector recovery will need to focus on rebuilding the operational infrastructure and expanding digital payments.
