By Chris Wright for Forbes International
Last month I spent several days on the West Bank, in the Palestinian Territories, researching a feature for Euromoney on how banks and businesses thrive under extreme stress.
The article appears in Euromoney today, and you can read it here.
The article was prompted by some highly impressive numbers from the biggest bank in the Territories, Bank of Palestine, which logged 20% year-on-year growth in its first-half numbers in August. How, I wondered, was that possible in a place like Palestine?
- Palestine, insofar as it is a state at all, is made up of two completely different places: West Bank and Gaza (plus East Jerusalem). The two are not connected, and there is no freedom of movement between them, with permits to travel controlled by Israel.
- Gaza was involved in a vicious war in 2014 that killed more than 2,000 of its citizens.
- The two halves have different governments: Fatah in the West Bank, Hamas in Gaza. The two sides don’t like each other, and Hamas, with an unflinching belief in the destruction of Israel, is considered a terrorist entity by most western institutions. Any local bank faces the additional pressure of trying to make sure it isn’t banking Hamas (Jordan’s Arab Bank has been fined heavily in the US for the suggestion that it once did).
- Even in relatively peaceful West Bank, 70% of the land is controlled by Israel and cannot be built upon or otherwise developed by West Bank citizens or business. Palestinians can’t use many of their own roads, and find their own water supply controlled and diverted by Israel, where they receive far less usable water – whether for drinking, hygiene or irrigation – than the Jewish settlements built on their land.
- My own experience of the Palestinian people on the West Bank is that the fundamental drive in their lives is to get by: to raise their families, educate their children, earn a living. Politics and religion only come into it insofar as they impact upon daily life.
- That being the case, businesses thrive by finding a way. The olive oil farmer I met spotted a market under the Fair Trade label more commonly associated with coffee. His company, Canaan Fair Trade, consolidates 2,500 families with small scale farms into one trading channel, guaranteeing them a living wage. Doing so puts the cost of the product beyond an acceptable price for locals to buy it, but no matter, they export to the US, where the Fair Trade label is valued. And, since there’s not enough water, they just focus on crops that don’t need much: olives and almonds.
- The situation is still more extreme in Gaza, where two million people live in a strip of land 25 miles long and three to seven miles wide, with dismal infrastructure, unreliable electricity and profoundly limited movement. Yet Iliana Montauk, an American who moved here to set up the Gaza Sky Geeks incubator fund, has helped to launch numerous online and virtual businesses (since in Gaza it’s best to have a business that exists in thin air rather than any physical infrastructure) and says they are the hardest working people in the world. Gazans don’t take annual leave, she says – where would they go? They’re not allowed to leave Gaza – and have taken to asking her to keep the office open until midnight so they can keep working, since there’s nothing else to do. “To launch a successful business you need entrepreneurs who are hungry to launch a business and willing to work incredibly hard to make that happen,” she says.
- In the West Bank, business is still local: everyone knows everyone else. This is perhaps part of the reason that creditworthiness is surprisingly high. The bank manager knows his or her clients personally, and probably their family and their neighbours; if someone gets into difficulties, the community tends to help them out; and people generally do not want to walk away from a debt since everyone else will know it’s out there.
- In places like this, full of niches and angles, the little guy can thrive, so banks like Bank of Palestine have done well by backing small to medium enterprises, or by helping the enfranchisement of women in business.
- Palestine’s diaspora is huge and powerful: it is estimated as much as $100 billion. Loyal and keen to help, mobilising that capital in business represents a colossal opportunity for the Palestinian economy (and, let’s be clear, it is far better that that money goes into a productive use in business and commerce than some of the alternatives).
- Palestine’s stock exchange allows a mechanism for that foreign-held capital to come home again. Today, liquidity is weak, but no more so than in other regional exchanges like Bahrain; the exchange is hoping to gain membership of the World Federation of Exchanges shortly.
- And here, for the frontier-spirited, is perhaps an investment case. Valuations are low, companies tend to pay a very high yield, and Palestine Exchange CEO Ahmad Aweidah says that with statehood, “we would be at least 10 times as big within five years.” True peace and independence would be an almighty investment opportunity.
Chris Wright is the author of No More Worlds to Conquer, published by HarperCollins
Original Article is here: http://www.forbes.com/sites/chriswright/2015/09/21/on-the-ground-in-palestine-the-businesses-that-thrive-under-pressure/