First Monthly Sector-Specific Discussion and Brainstorming Session

Location: AmCham Jordan Meeting Room

The First Monthly Sector-Specific Roundtable for Finance and Banking was attended by representatives from the U.S. Embassy, Capital Bank of Jordan, NCR Corp, USAID, ABC Bank, Jordinvest, CHR International, Bank of Etihad. The discussion dealt with several topics, ranging from SME financing to the health of Jordan's financial markets to microfinancing.

SMEs are the backbone of any developing or developed economy, yet they routinely run into obstacles when searching for financing. The new OPEC  loan program attempts to solve this problem by providing incentives to commercial banks to lower interest rates and collateral requirements for SME borrowers. Two banks have signed so far – Arab Bank and Cairo Amman Bank -  and the Bank of Etihad is expected to finalize negotiations soon. It was noted that interested SMEs should be referred to the banks directly, as OPEC only reviews applications but does not provide the funding. Additionally, the 60-75% of the loans are guaranteed by OPEC, minimizing risk for the banks, and further incentivizing a lower interest rate. The remaining exposure is covered by non-private asset collateral.

Jordan's financial markets are also a source of wealth for many individuals. Unfortunately the 2008 market crash led to a continuing recession and much of this wealth has since disappeared. Unsurprisingly, American investors are leaving the Jordanian market, unwilling to deal with the capital freeze in the finance industry. However, Jordan is one of the oldest, most well-developed and deepest markets in the region, placing it in an ideal position for competition with the GCC. By promoting Jordanian investment opportunities abroad and instituting policies that make it easier for investors to enter the market, Jordan's capital will begin moving again.

It was also agreed by the attendees that microfinancing is a thriving and developing sector in the Jordanian economy. Although the capital involved is lower than that of commercial banks, returns on investments are higher in the microfinance business, as is the loan collection rate. It was pointed out that most Jordanian businesses do not understand the difference between commercial banks and microfinance initiatives, making education on the subject a priority for the future.

The roundtable was a resounding success. The discussion was lively and many ideas were presented on several topics. Future meetings will deal with other subject of interest to the sector, hopefully suggesting specific actions to take to resolve issues.