Impact of Commercial Banks’ Credit Policy on Private Investment in Palestine

Discussion Committee: 
Prof. Basim Makhool
Jaser Mohammed Sai’d Al-Khalil
This thesis aimed at studying the credit policy of the operating commercial banks in Palestinian Territories. Moreover, this study aimed at finding its links and correlation with private investment as well as its impact on investment development and trends. Furthermore, this study aimed at finding out answers for following study’s key issues, in order to improve the hypothesis that the Commercial Banks’ Credit Policy has impact on Private Investment in Palestine: - What the concepts, determinants and aspects of the credit policy and its role to manage the risks and its impact on banking performance? - What are the important determinants of the credit’s supply and demand, whether in general level or on Palestine? - What is the role of the credit policy of the operating commercial banks in Palestine in supporting and directing the private investments? - What are the determinants and the relationships between credit policy and the private investment? And how to measure it? - What are the mathematical and econometric models that are used for studying and analyzing these relationships? What is the possibility of implementing it on Palestinian reality? - To what extend the credit policy is participating in determining the level, concentrations and structure of the private investment? - What are the needed approaches to support the positive aspects and to develop the corrective actions? To achieve the purpose of this study, the researcher used off-site research and analysis mode, which is based on periodic reports issued by Palestine Monetary Authority (PMA), official Statistics of Palestine Central Bureau of Statistics (PCPS), Palestine Economic Policy Research Institute (MAS), UNDP’s publications and Arab Monetary Fund’s reports as well as circulars, regulations and instructions that were issued by PMA or other related parties, which impact the credit facilities’ demand and supply. In addition, to the descriptive analytical approach, the researcher applied other quantitive analytical approaches, such as: means compare model, elasticity analytical model, sample regression model, multi-regression model and Granger-causality model. The SPSS and Shazam software analytical programs were used to apply these models. This study concludes to the necessity of focusing on orienting the efforts to promote and induce the demand on investments. This goal needs real support for investment and infrastructure. It also needs increasing the credit facilities and active credit policy, in a way that allows optimal use and allocation the fund resources to support private investment, as a result of the feedback relationship between these variables. The credit policy role for inducing investment is subject to various factors that command investment environment in Palestine and leads to limiting its developmental role in that respect. However, the credit policy has some negative effect on investment, as this study showed.This has negative impact on the credit policy vital direction and its funding role to motivate investment process. Whereas, banking sector is over liquid, it became as a channel to bleed the national savings. Related parties that are concerns with this issue did not worked enough to find out approaches to lead its activities toward medium and long term funding policy as well as banking sector did not play its economic- social role, as needed, as the economic development, and supporting the local investments are not included on its credit policy priorities, as well.
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