Financing Development in Palestine through Microfinance Institutions and Development Banks:Options and Challenges

This study formed one of MAS’s priority research topics for 2021, examining options for - and challenges in – the financing of development in Palestine, considering different mechanisms and institutions. In this context, microfinance institutions play a major role, providing microfinance services to poor, low-income and marginalized groups that cannot access financing provided by the mainstream banking sector. In 2021, the Palestinian government announced the establishment of the Independence Bank for Investment and Development. The study addresses the problems that accompanied this announcement, in light of the lack of clarity on its objectives and its developmental role, combined
with the lack of a comprehensive vision for development and the national fight against poverty. With this in mind, the study proposes a set of appropriate interventions and policies for various relevant authorities, including the Independence Bank, in order to enhance development finance and the access capabilities of poor/marginalized groups. The
study also outlines tools to regulate the relationship between the Independence Bank - as a governmental tool for investment and development - and microfinance institutions. 
The study concludes that there are great opportunities for the growth of the microfinance sector. However, the removal of challenges faced by the sector is essential, to enable it to play a greater role in promoting comprehensive and sustainable development in Palestine. This requires adopting appropriate measures and policies by various relevant
authorities. The study recommends adopting a comprehensive development concept by microfinance institutions that is relevant to the Palestinian context; directing efforts to establish guarantee funds/programs for financing provided by microfinance institutions; developing and activating complementarity in the microfinance system; securing temporary financing lines for microfinance institutions, fallowing them to withstand emergencies arising from Israeli policies hostile to the Palestinian economy.