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Financial and insurance sectors in Jordan: the way forward National Conference Harnessing Services for Sustainable Development: Opportunities and Challenges for Jordan 21 – 22 September 2010.

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Financial and insurance sectors in Jordan: the way forwardNational ConferenceHarnessing Services for Sustainable Development: Opportunities and Challenges for Jordan21 – 22 September 2010

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A missing link?Banking sector snapshotImproving the financial ecosystemJEDCO JSMP Access to FinanceGoing further

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A well developed service sector

  • Financial Sector is THE interlinked service sector
  • Measure of financial development
  • Monetary sector and monetary policy
  • Regulation and supervision
  • Banking sector
  • Non bank financial sector
  • Institutional environment
  • Contribution to the economy (2009)
  • 8.9% of GDP in 2009 24,000 employees (3% but qualified)
  • 18% of total merchant services Direct Export contribution to SerSec
  • Main players
  • 28 banks (4 Islamic / 10 foreign) – 600 branches - 26 insurance companies
  • Bk Assets: JD33 bn – Premium: JD330 m – 165 listed companies: JD20 bn
  • => Focus on interlinkage: ACCESS TO FINANCE

IMF Comprehensive Financial Development Index (CFDI) ranks Jordan second after Lebanon in the MENA region

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But is a link missing?

  • Ranked 127/183 for access to credit (Doing Bus. 2010)
  • Contrasts with the WEF Financial Development index (25 / 55)
  • Other indices are in preparation (OECD)
  • => What impede the financial sector from doing better?
  • => Despite its modest size, the FinSec is the blood of SerSec
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A missing link?Banking sector snapshotImproving the financial ecosystemJEDCO JSMP Access to FinanceGoing further

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Is the service sector well served?

=> A support in line with importance of the SerSec

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KFS: Strong regulator / prudent risk mgt

=> Resilient sector positioned for growth

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A missing link?Banking sector snapshotImproving the financial ecosystemJEDCO JSMP Access to FinanceGoing further

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Improving the financial ecosystem

Framework: Euro-Mediterranean Charter for Enterprise / JSMP FSSD

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A missing link?Banking sector snapshotImproving the financial ecosystemJEDCO JSMP Access to FinanceGoing further

banking window programme providing sme financial intermediation services
Banking Window ProgrammeProviding SME financial intermediation services

The Banking Window offers three key services

Aimed at facilitating access to finance for services SMEs

Increasing company’s readiness (systems)

Access to competitive bank / equity financing (financial intermediation)

Better use of and access to collateral / improvement of financial terms(negotiation).

In-house advisory and coaching

Production of credit report

External technical assistance

Introduction to JEDCO network of financial institutions (MOU)

venture capital programme developing innovative financial instruments
Venture Capital ProgrammeDeveloping innovative financial instruments

Cabinet decision: establish 2 Funds

Venture Capital and Developt

Co-sponsored by GoJ and the European Investment

Championing a VC tax friendly environment in line with international competition

Selecting managers according to strict process

Assisting in structuring and fund raising

Early Stage Fund:

10-15 Meuros - GoJ / EIB pre- committed 3 Meuros - 30% to 60% of min.

Capital for Growth Fund:

30 to 50 Meuros (min. 20) - GoJ / EIB pre-committed 7 Meuros

35% of minimum size

services sme loan guarantees strengthening borrowers creditworthiness
Services SME loan guaranteesStrengthening borrowers’ creditworthiness

JSMP LT loan guarantee facility.

60% default coverage<Euro75k

Delegation to banks (small dossiers)

Implementing body: JLGC (under discussion)

Assessment of the situation in Jordan showing huge gap

Assistance to the development of the business plan

Study tour (Lebanon and France)

Technical documentation

Follow-up of EUR6m fund

Need to ensure high impact

High leverage

Incentives for banks

Fast decision process

Why not burning the fund?

Extra-incentives

sme financing advisory committee providing policy input
SME Financing Advisory CommitteeProviding policy input

Stakeholder committee focusing on SME financing

Fed with practical surveys (sector needs, international practices, innovative instruments)

Issuing recommendations

Proves to be efficient (Turkey, Lebanon, Morocco)

Gathers stakeholders

Recommendations at all levels

Advisor for Gvt. and donors finance

Identify a hosting body for the initiative

Concept note drafted and validated

Stakeholders mobilized

Preliminary list of feeding studies (e.g. Factoring)

Difficulties in finding proper hosting body

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A missing link?Banking sector snapshotImproving the financial ecosystemJEDCO JSMP Access to FinanceGoing further

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