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Palestine: Cash and Banking Infrastructure

Categories : Cash and Crises, Cash is available to all users, Cash is the most widely used payment instrument
November 20, 2023
Tags : Access to cash, ATMs, Bank branches, Cash and Crises, Cash Infrastructure, Palestine
Cash prevails in the Palestinian economy in the form of Israeli shekels. Cross-border payments are unstable. Cash transfers will have a limited impact without humanitarian supplies to help displaced Gazans.
Manuel A. Bautista-González

Ph.D. in U.S. History, Columbia University in the City of New York

Post-Doctoral Researcher in Global Correspondent Banking, 1870-2000 – Mexico and South America, University of Oxford

This post is also available in: Spanish

Money and Banking in Palestine

Established after the Paris Protocol in 1994, the Palestinian Monetary Authority (PMA) is the primary monetary and banking authority in the West Bank and Gaza. However, the PMA does not issue banknotes or coins, as the Israeli shekel (NIS) is the primary currency in circulation in the cash-based Palestinian economy, as Israel is Palestine’s leading trade partner.

The PMA’s mandate includes ensuring the supply of foreign cash in various currencies and denominations to meet the public’s demand, particularly in emergencies and crises.

The Cash and Banking Infrastructure

Per the PMA, there were 13 banks, 378 bank branches, 724 ATMs, and 14,192 POS terminals as of 2022 (PMA 2023: 88). The number of ATMs in the Palestinian territories increased from 2014 to 2019; they declined in 2020 and have increased slightly since then (see Graph 1). The number of bank branches grew from 2014 to 2020 and decreased by 0.3% in 2022. POS terminals declined by 10.8% in 2017 but increased by 77.3% in 2022.

Graph 1. Palestinian Territories: ATMs, Bank Branches, and POS Terminals, 2014-2022.

Note: Left vertical axis: ATMs and bank branches (hundreds). Right vertical axis: POS terminals (thousands). Source: PMA (2020: 106, 2021: 103, 2022: 106, 2023: 88).

The number of ATMs per 100,000 adults in the West Bank and Gaza peaked at 24.87 in 2019 and declined to 23.24 in 2021, a 6.6% decline (see Graph 2, panel A). Commercial bank branches per 100,000 adults peaked at 13.2 in 2020 and fell to 12.8 a year after, a 3% fall (Graph 2, panel B).

Graph 2. Palestinian Territories: ATMs and Commercial Bank Branches per 100,000 adults, 2004-2021


B) Commercial Bank Branches

Source: World Bank (2023).

A 2016 financial inclusion study by the Palestinian Economic Policy Research Institute “revealed the need for more [bank] branches and ATMs, especially in the Gaza Strip, rural areas, and West Bank camps” (PMA 2016: 5). The situation has not changed much, as the U.K.’s Foreign, Commonwealth, and Development Office (FCDO) indicates that “there are fewer ATMs in the West Bank and Gaza.”

Cross-Border Payments

Cross-border payments are slow and unstable as Israeli banks seek to diminish or eliminate correspondent banking relationships with Palestinian banks, citing concerns about money laundering and the financing of terrorism.

Graph 3. Palestinian Territories: Excess Cash (Billions of NIS), 2018-2023

Source: IMF (2023: 11).

Cash and Humanitarian Relief for Gaza

The United Nations Relief and Works Agency (UNRWA) and other organizations aid 77% of households in Gaza with cash or food. The Qatari government provides aid for welfare payments and public servants’ wages in Gaza by sending funds to Israel under UN supervision. Before, Qatar sent the funds in suitcases filled with cash; now, it transfers them to banks. Israeli and United Nations officials hand-carry cash from Israel across the border to Gaza, according to Reuters.

Palestinian banks operate normally in the West Bank as of October 24, per The National. The UN World Food Programme (WFP) distributes cash-based transfers to 164,000 people in Gaza and the West Bank. People can redeem electronic vouchers for food items in local shops, but supplies are winding down. The WFP is working to make available cash-based platforms for humanitarian relief.

However, cash transfers will make little without humanitarian aid to Gaza in the form of food, water, and medical supplies, as the blockade and war prevent local actors from producing goods to meet the needs of displaced populations, according to Topher McDougal, professor of economic development at the University of San Diego:

“Simple cash transfers are not really helpful in this particular case because of price elasticity of supply. In many other economies, cash transfers can stimulate local production. […] In an economy that is so cut off, such as Gaza’s, it’s so isolated – dumping currency into a market that can’t produce what’s demanded is just a recipe for massive inflation.”

This post is also available in: Spanish