Finance / Jordan

Financiers prove their resilience under pressure

Jordan’s finance sector maintains one of the top capital adequacy rates in the region, and continues to improve while under external stress. Such lessons can be invaluable exports for neighbors in need.

Financiers prove their resilience under pressure

Zahran district in downtown Amman, the country’s business center

Jordan’s financial sector has beaten the odds, maintaining resiliency through border closures, perennial terrorism threats and a refugee crisis. Today banks continue to post improvements in credit growth, non-performing loans and liquidity. The Kingdom now boasts one of the highest capital adequacy rates in the Middle East North Africa region. And while public debt needs to be tamed, it’s clear that financiers have learned to progress amid pressure, experience that will be a valuable exportable asset when it comes time to rebuild the region.

Jordan should expect to play a central role in the futures of Iraq and Syria, says the chief of the Central Bank of Jordan (CBJ), which plans to promote fintech to increase financial inclusivity, including in refugee communities. “Historically, our role in the region has been fundamental,” said CBJ Governor Ziad Fariz. “In Syria, subsidiaries from three Jordanian banks are represented. In Iraq, we have noticed many opportunities,” he observed. “I expect Jordan to play a central role in the region after the situation stabilizes since we have the expertise and skilled labor needed to help neighboring countries rebuild their institutions.”

Jordan’s secret to maintaining financial stability has been prudence. Where benchmarks have been set, banks have worked to supersede them. “Our banks’ capital adequacy ratio average is around 17.8% as of June 2017, which is above our minimum requirement of 12%. Bank liquidity is constantly monitored as part of a national strategy to achieve sustainable growth, an aim that might be considered a little optimistic in midst of regional unrest,” says Fariz.

“I expect Jordan to play a central role in the region after the situation stabilizes.” Ziad Fariz – Governor of the Central Bank of Jordan

But its exactly this optimism that has kept Jordan on its toes. In the face of fiscal challenges, the CBJ has maintained its goal to increase financial inclusivity from 24.6% to 41.5% by 2020, including coverage for women, a conspciously underserviced segment. In MENA, “52% of men but only 35% of women have an account, the largest gender gap of any region,” the World Bank says. Technology will be the answer here. “We have developed retail payment systems and services that allow the unbanked segments to open digital wallets and have access to money transfers, transact, and pay bills,” Fariz announces.

Lowering runaway public debt will remain a top priority. Part of the government’s latest plan to tackle debt, which is 95.3% of GDP, is to follow the success of a 2017 Eurobond issuance, which “reflected international confidence in the ability of the economy,” says Fariz. Markets will need to see more of the same.