Recent Credit Stagnation in the Mena Region
Recent Credit Stagnation in the Mena Region

Author: Mr.Heiko Hesse

Publisher: International Monetary Fund

Published: 2010-09-01

Total Pages: 21

ISBN-13: 1455208841

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This paper examines the recent credit slowdown among Middle Eastern and North African (MENA) countries from three analytical angles. First, it finds that, similar to other regions and to its past history, a credit boom preceded the current slowdown, and that a protracted period of sluggish growth is likely going forward. Second, it uncovers a key role played by bank funding (deposit growth and external borrowing slowed considerably) but whose effect was frequently dampened by expansionary monetary policy. Third, bank-level fundamentals - capitalization and loan quality - helped to explain differences in credit growth across banks and countries.

Recent Credit Stagnation in the Mena Region
Recent Credit Stagnation in the Mena Region

Author: Mr. Ralph Chami

Publisher: INTERNATIONAL MONETARY FUND

Published: 2010-09-01

Total Pages: 19

ISBN-13: 9781455209774

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This paper examines the recent credit slowdown among Middle Eastern and North African (MENA) countries from three analytical angles. First, it finds that, similar to other regions and to its past history, a credit boom preceded the current slowdown, and that a protracted period of sluggish growth is likely going forward. Second, it uncovers a key role played by bank funding (deposit growth and external borrowing slowed considerably) but whose effect was frequently dampened by expansionary monetary policy. Third, bank-level fundamentals - capitalization and loan quality - helped to explain differences in credit growth across banks and countries.

Jobs, Access to Credit, and Informality in the Middle East and North Africa
Jobs, Access to Credit, and Informality in the Middle East and North Africa

Author: Emanuele Brancati

Publisher:

Published: 2022

Total Pages: 0

ISBN-13: 9789286153235

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Job creation in the Middle East and North Africa is sluggish, and Enterprise Survey data show that difficult access to credit, and competition from the informal sector play a role in this stagnation. The economic environment in the Middle East and North Africa (MENA) region is characterised by a long-lasting stagnation in job creation. Over the period 2016-2019, employment growth was about 1.4%, well below the performance of lower-middle- and upper-middle-income countries. One crucial determinant of employment growth is finance, with recent evidence documenting the positive effect of access to credit on employment and investment. Yet, an obstacle to the virtuous role of the financial system in the region is the disconnectedness of private firms from the banking sector. Another important feature of MENA economies is informality. Data from the Enterprise Surveys show that 29% of MENA firms say they are exposed to competition from informal firms, which poses a possible threat to the proper functioning of the economy and to the operation of formal firms. The Enterprise Surveys, conducted by the EIB, EBRD and the World Bank, provide insight into what lies beneath the region's relatively slow growth, with a focus on the reasons for stagnating productivity and inadequate accumulation of human and physical capital in the private sector. This working paper is the second of nine supporting the full report: Unlocking sustainable growth in the Middle East and North Africa private sector.

Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects
Nonperforming Loans in the GCC Banking System and their Macroeconomic Effects

Author: Mr.Raphael A. Espinoza

Publisher: International Monetary Fund

Published: 2010-10-01

Total Pages: 26

ISBN-13: 1455208892

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According to a dynamic panel estimated over 1995 - 2008 on around 80 banks in the GCC region, the NPL ratio worsens as economic growth becomes lower and interest rates and risk aversion increase. Our model implies that the cumulative effect of macroeconomic shocks over a three year horizon is indeed large. Firm-specific factors related to risk-taking and efficiency are also related to future NPLs. The paper finally investigates the feedback effect of increasing NPLs on growth using a VAR model. According to the panel VAR, there could be a strong, albeit short-lived feedback effect from losses in banks’ balance sheets on economic activity, with a semi-elasticity of around 0.4.

Challenges of Growth and Globalization in the Middle East and North Africa
Challenges of Growth and Globalization in the Middle East and North Africa

Author: Mr.Hamid R Davoodi

Publisher: International Monetary Fund

Published: 2003-09-05

Total Pages: 44

ISBN-13: 9781589062290

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The Middle East and North Africa (MENA) is an economically diverse region. Despite undertaking economic reforms in many countries, and having considerable success in avoiding crises and achieving macroeconomic stability, the region’s economic performance in the past 30 years has been below potential. This paper takes stock of the region’s relatively weak performance, explores the reasons for this out come, and proposes an agenda for urgent reforms.

Are Banks Really Lazy? Evidence from Middle East and North Africa
Are Banks Really Lazy? Evidence from Middle East and North Africa

Author: Mr.Simon Gray

Publisher: International Monetary Fund

Published: 2014-05-13

Total Pages: 40

ISBN-13: 148438668X

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We investigate whether low loan-to-deposit (LTD) ratios and high levels of reserve balances at the central bank (or holdings of government securities) are a reflection of policy-driven factors compared to commonly cited reasons of reluctance to lend or sometimes weak investment demand in uncertain environments. We examine changes to central bank (CB) balance sheet structures as well as commercial banks’ flow of funds over the period 2007–2012. First, Middle East and North Africa (MENA) CBs play an active role in view of their size that is very large with respect to their economies compared to CBs in advanced economies. Second, under exchange rate targeting, most MENA CB balance sheets are asset-driven, holding foreign exchange (FX) reserves to support the exchange rate policy and resulting in lower loan-to-deposit (LTD) ratios in the case of unsterilized increases in FX. Third, CB policy decisions seem to be accompanied by an increase in commercial bank reserve money balances, with ensuing reduction in the LTD. Finally, if governments meet their financing needs from the banking system—whether from commercial banks or by monetary financing—commercial bank balance sheets will tend to expand, resulting in lower LTD ratios. Our analysis suggests that government and CB actions may also drive the demand for and supply of credit, which are traditionally attributed to the behavior of banks and non-financial corporates and households only. The findings offer a different interpretation of changes in CB and banks’ balance sheets, with direct implications for LTD, calling to exercise caution in recommending policy action which aim at propping up LTD to ‘appropriate’ levels in an effort to reinvigorate credit following a downturn.

Rapid Credit Growth
Rapid Credit Growth

Author: Selim Elekdag

Publisher: International Monetary Fund

Published: 2011-10-01

Total Pages: 43

ISBN-13: 1463922620

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Episodes of rapid credit growth, especially credit booms, tend to end abruptly, typically in the form of financial crises. This paper presents the findings of a comprehensive event study focusing on 99 credit booms. Loose monetary policy stances seem to have contributed to the build-up of credit booms across both advanced and emerging economies. In particular, domestic policy rates were below trend during the pre-peak phase of credit booms and likely fuelled macroeconomic and financial imbalances. For emerging economies, while credit booms are associated with episodes of large capital inflows, international interest rates (a proxy for global liquidity) are virtually flat during these periods. Therefore, although external factors such as global liquidity conditions matter, and possibly increasingly so over time, domestic factors (especially monetary policy) also appear to be important drivers of real credit growth across emerging economies.

Basel Capital Requirements and Credit Crunch in the MENA Region
Basel Capital Requirements and Credit Crunch in the MENA Region

Author: Mr.Sami Ben Naceur

Publisher: International Monetary Fund

Published: 2013-07-03

Total Pages: 39

ISBN-13: 1484354478

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The 1988 Basel I Accord set the common requirements of bank capital to promote the soundness and stability of the international banking system. The agreement required banks to hold capital in proportion to their perceived credit risks, and this requirement may have caused a “credit crunch,” a significant reduction in the supply of credit. We investigate the direct link between the implementation of the Basel I Accord and lending activities, using a data set spanning annual observations covering 1989–2004 for banks in Egypt, Jordan, Lebanon, Morocco, and Tunisia. The results provide clear support for a significant increase in credit growth following the implementation of capital regulations, in general. Despite higher capital adequacy ratios, banks expanded credit and asset growth. Credit growth appears to be driven by demand fluctuations attributed to real growth, cost of borrowing, and exchange rate risk. Overall, the effects of macroeconomic variables, in contrast to capital adequacy, appear to be more dominant in determining credit growth, regardless of the capital adequacy ratio, and regardless of variation across banks by nationality, ownership, and listing.

Financial Integration
Financial Integration

Author: Marga Peeters

Publisher: Springer Science & Business Media

Published: 2013-09-21

Total Pages: 230

ISBN-13: 3642356974

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The Arab upheaval and the world's biggest financial crisis after the Great Depression were almost simultaneous in their occurrence. The Mediterranean economies now face a dual challenge of a political and financial restructuring in the light of a shaky economic pedestal on which they stand. In light of this socio-political and economic shift in both inland and in world markets, this book offers a thorough analysis on problems, prospects and the way ahead for the financial integration of the South-Mediterranean region. Several perspectives on financial integration and policy recommendations are put forward from a leading group of researchers specializing on the Mediterranean region.