Constraints facing Arab banks

Journal Article · Tue Apr 01 00:00:00 EST 1980 · OAPEC News Bull.; (United States)

OSTI ID:5436859

Khadra, F

Development projects in the Arab world have enormous investment requirements that Arab banks at present can only partially handle due to: (1) the low level of personal savings in a number of Arab countries as a result of low income levels; (2) the low capitalization of most Arab banks relative to the volume of lending activity required; (3) the reluctance of oil surplus countries to deposit any sizeable part of their funds with their own banks instead of foreign banks. Funds available in the currencies of the oil surplus countries are very limited compared to the volume of funds required for projects. It is necessary therefore that the majority of loans be made in foreign currencies, making it necessary for Arab banks to have high international credit status. Arab banking practices and laws, which vary from country to country, are not compatible with the requirements of international lending or the establishment of well-developed financial markets. Some of the banks' organizational structures and internal practices may have become so entrenched as to make any transition not feasible. In some cases it may be more practical to establish a new financial institution with different orientations and activities than to transform the existing one. Another major constraint of the Arab banking environment is the lack of a permanent intermediary, acceptable to both the surplus countries' banks and to the borrowers. The final constraint discussed, the political environment, has prompted many Arab countries to enact legislation to guarantee a politically stable environment to safeguard risk against expropriation, nationalization, or freezing of assets. (SAC)

• OSTI ID: 5436859
• Journal Information: OAPEC News Bull.; (United States), Vol. 6:4
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING
POLICY AND ECONOMY
MIDDLE EAST
OAPEC
ECONOMIC POLICY
OPEC
CAPITAL
ECONOMIC DEVELOPMENT
FINANCIAL INCENTIVES
FINANCING
GOVERNMENT POLICIES
INSTITUTIONAL FACTORS
INVESTMENT
POLITICAL ASPECTS
SOCIO-ECONOMIC FACTORS
INTERNATIONAL ORGANIZATIONS
OIL-EXPORTING COUNTRIES
290200* - Energy Planning & Policy- Economics & Sociology
294002 - Energy Planning & Policy- Petroleum