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Micro finance in Palestine: issues, performance, and trajectories

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  • Paolo Di Martino

    ()

  • Shaker Sarsour

    ()

Abstract

Despite the growing interest in the subject of micro finance very little, if any, academic research on the Palestinian case exists. This paper starts filling this gap by analysing the development of the micro credit industry in Palestine between 2000 and 2008. This paper shows that at macro level the industry has a strong potential for growth, but its full development is frustrated by inefficiencies in credit allocation and high level of risk, whose most evident sign being the problem of late or no re-payment of loans. By using data from one of the most important micro credit agencies, the Arab Centre for Agricultural Development (ACAD), we analyse the determinants of late payment. The most important results are that high interest rates increase the probability of late repayment, loan size, when above the “micro” threshold has no impact, while female customers and the one with banks guarantees are less likely to pay late. The policy implications are that while going towards a more “market-based” approach might provide some advantages in terms of risk reduction, it will not per se solve the problem while will certainly expose the most vulnerable sectors of the population to further credit rationing

Suggested Citation

  • Paolo Di Martino & Shaker Sarsour, 2009. "Micro finance in Palestine: issues, performance, and trajectories," Department of Economics University of Siena 581, Department of Economics, University of Siena.
  • Handle: RePEc:usi:wpaper:581
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    File URL: http://repec.deps.unisi.it/quaderni/581.pdf
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    References listed on IDEAS

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    1. Daniel Hardy & Paul Holden & Vassili Prokopenko, 2003. "Microfinance institutions and public policy," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 147-158.
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    Keywords

    Palestine; micro finance; economic development;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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