Palestinian Loan Guarantee Schemes

The Portland Trust, the Aspen Institute, the US Overseas Private Investment Corporation (OPIC) and the Palestine Investment Fund designed a Palestinian Loan Guarantee Facility (LGF) to encourage banks to extend credit and boost the provision of affordable finance for Palestinian small and medium enterprises. A $230m facility was launched in July 2007. Loans from $10,000 to $500,000 are backed by a 70% guarantee.

LGF was not designed to be a permanent fixture in the Palestinian economy. It is a temporary, ten-year intervention intended to address credit system bottlenecks and stimulate lending. The two-year wind down period officially commenced on 1 October 2015. During this period, no new loans will be approved and the Middle East Investment Initiative (MEII), who manage the Fund, will focus on monitoring the outstanding portfolio over the next 2 years. The LGF portfolio continues to have broad diversification both in terms of geography and economic sectors.

By the end of Q3 2015, 963 loans totalling $147m were approved. Most of the LGF portfolio continues to go to small businesses; nearly 86% of approved loans were below $200,000.

The geographic breakdown of the LGF portfolio continues to be evenly distributed throughout the West Bank. Ramallah has the largest number of loans at 20% followed by Nablus at 19%, then Jenin and Hebron with 14% and 12% respectively. 491 loans have since been repaid totalling almost $75 million. The scheme targets a range of businesses and includes a technical assistance programme to help banks market their financial products more successfully. The Chairman of The Portland Trust in Ramallah, Samir Hulileh, sits on the LGF’s advisory board working to maximise its impact.