Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (59) of 2019

Concerning Investment in Targeted Economic Projects

Based on the provisions of Legislative Decree No. (9) of 2010 concerning Banks, particularly Article (18) thereof, and in accordance with the powers delegated to us, and in pursuit of the public interest, we have issued the following Instructions:

Article (1)

Objective

These Instructions aim to enhance the role of banks in sustainable economic development by investing in emerging Palestinian projects and companies that contribute to economic growth, job creation, and the encouragement of innovation, creativity, entrepreneurial projects, and projects related to environmental conservation.

Article (2)

Scope of Application

The provisions of these Instructions shall apply to all banks licensed by the Palestine Monetary Authority to conduct banking business.

Article (3)

Investment in Equity

1. Banks may undertake the following: a. Participate in one or more emerging Palestinian companies whose objectives include engaging in agricultural, animal, industrial, alternative energy, or information technology activities that support creativity, innovation, and startups in the field of environmental conservation, subject to obtaining prior written approval from the Palestine Monetary Authority.

   b. Have more than one bank participate in establishing these companies, provided that the bank's maximum share does not exceed 80% of the company's capital.

2. When investing in the aforementioned companies, banks must consider the following: a. Allocate and earmark an amount for investment in startups and establish a specific policy for investing in this type of investment. b. The bank's ownership period in the company shall not exceed 10 years, and this period may be extended upon obtaining prior written approval from the Palestine Monetary Authority. c. The objective of investing in the company must be linked to the investment's impact on economic growth and job creation, and its contribution to strengthening the knowledge economy and supporting intellectual and creative skills. d. Provide advice and consultation to the companies and the company's executive management, and actively contribute to the management and success of the company's operations.

Article (4)

Documents and Records

A bank wishing to participate in an emerging Palestinian company must apply for prior written approval from the Palestine Monetary Authority, attaching at a minimum the following information with the request:

1. The proposed paid-up capital.
2. Names of shareholders and the company's governance structure.
3. Economic feasibility study.
4. Draft company documents (memorandum of association, articles of association, etc.).
5. Board resolution of the bank approving the participation in the company.
6. Commitment from the bank's management to exit the participation in the company within a maximum of 10 years.

Article (5)

General Provisions

1. The bank must develop an exit plan for its investment in the companies to be established within a period not exceeding 10 years from the date of establishment.
2. If the bank wishes to retain its investment in one of the established companies, it must submit a request to the Palestine Monetary Authority, specifying the reasons, justifications, and objectives for retaining the participation.
3. The value of participation in the capital of companies established under these Instructions shall be weighted with a 50% risk weight for the purpose of calculating the capital adequacy ratio.
4. The Palestine Monetary Authority may, as stipulated in instructions, allow the deduction of the bank's participation value in the aforementioned companies from deposits subject to mandatory reserve requirements.

Article (6)

Repeal

All provisions conflicting with these Instructions are hereby repealed.

Article (7)

Implementation and Language

All competent authorities shall, each within their respective jurisdiction, implement the provisions of these Instructions, which shall apply from the date of their issuance. Issued in Ramallah on this day, corresponding to 20/11/2019.

[Signature] Dr. Mohammed Mahdi Supervision and Inspection Department Palestine Monetary Authority

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Note: At the bottom of each page, the following contact information appears:

Ramallah and Al-Bireh Governorate - Palestine P.O. Box 452 info@pma.ps | Fax: +970 2 2415310 | Fax | Tel: +970 2 2415251 | Phone

Gaza - Palestine P.O. Box 4026 Fax: +970 8 2844487 | Fax | Tel: +970 8 2825713 | Phone

www.pma.ps