CBJ chief urges ‘bankable projects’ to secure financing from ‘highly liquid’ banks

AMMAN – Jordan's banking sector is “highly liquid” but the private sector has to come up with bankable projects to ensure funding, Governor of the Central Bank of Jordan (CBJ) Ziad Fariz told businesspeople on Wednesday. 

At a meeting with board members of the Jordanian Businessmen Association (JBA), Fariz said commercial banks enjoy excess liquidity of around JD3.5 billion, adding the CBJ has taken a series of monetary measures over the past two years to encourage lenders to cater for the financing needs of the various economic sectors in order to stimulate the economy. 

Responding to remarks by JBA President Hamdi Tabbaa that commercial banks should increase lending to small- and medium-sized enterprises (SMEs), the CBJ governor said financing for SMEs is available for “feasible businesses” that would encourage banks to finance them without too much risk. 

He cited a CBJ programme to secure credit facilities for various economic sectors such as industry, agriculture, tourism and renewable energy, adding the value of the funds available stood at around JD983 million while only JD100 million has been extended to target borrowers so far. 

The official called on government agencies and banks to provide the private sector with guidelines on how to develop their businesses to be attractive for commercial banks’ credit facilities.

Fariz said his bank is mulling the possibility of establishing a specialised fund to finance start-ups in the Kingdom by offering guarantees through the Jordan Deposit Insurance Corporation as entrepreneurial projects usually lack the credit history and expertise to secure funding. 

The governor also indicated that the CBJ is in discussions with the World Bank to reach another low interest and long-term loan agreement worth $70 million to be re-lent to local banks who will allocate the funding to microprojects and SMEs, adding the CBJ is also set to sign a $100 million loan agreement with the Arab Fund for Economic and Social Development in the coming weeks to extend credit to SMEs via banks. 

In March 2013, the World Bank extended a $70 million loan to boost lending to both new enterprises and those existing entrepreneurs struggling with sources of finance.

On the recent decision of the central bank to lower key interest rates by 25 percentage points, which is the fifth measures in two years, Fariz said the domestic market will see results of the move on banks lowering interest rates on credit facilities in five to six months. 

He criticised banks for lowering interest rates immediately on deposits while remaining reluctant to reflect the decision on loans.