Instructions No. (15) of 2023 Regarding the Sustainability Fund (+)

Palestine Monetary Authority

Instructions No. (15) of 2023 Regarding the Sustainability Fund (+)

Based on the provisions of Law No. (9) of 2010 concerning Banks, particularly Articles (40 and 72) thereof, In accordance with the powers delegated to us, And in pursuit of the public interest, We have issued the following Instructions:

Article (1) Definitions

The words and phrases appearing in these Instructions shall have the meanings specified below, unless the context indicates otherwise: Credit: Loans or financing granted by a commercial bank or an Islamic bank. Incentives: The cash repayment program provided by the Palestine Monetary Authority to beneficiaries of financing programs who comply with repayment, in accordance with the relevant instructions.

Article (2) Objective and Scope of Application

1. The provisions of these Instructions aim to inject liquidity into the economy to finance developmental projects and contribute to revitalizing the national economy within the framework of achieving sustainable development goals.
2. The provisions of these Instructions apply to all banks licensed by the Palestine Monetary Authority to conduct banking business in Palestine.

Article (3) Establishment of the Sustainability Fund (+)

1. The Palestine Monetary Authority establishes, pursuant to these Instructions, a fund named the "Sustainability Fund (+)" with a value of (500) five hundred million shekels, aimed at providing financing to various economic sectors through the following programs: a. Recovery Program for Affected Projects. b. Healthcare Sector Financing Program. c. Agricultural Sector Financing Program. d. Renewable Energy, Efficiency, and Environmental Conservation Financing Program. e. Any other sector approved by the Palestine Monetary Authority.

Article (4) Financing Programs

Banks must commit to directing credit granted through the Sustainability Fund (+) exclusively to the following programs and objectives:

1. Recovery Program for Affected Projects, providing necessary liquidity to: a. Recover from the political and economic crisis impacts on affected and most severely affected projects. b. Provide raw materials and necessary supplies to ensure project continuity and product development. c. Preserve and invest in human capital. d. Maintain the production cycle and target new sectors. e. Address liquidity shortages.
2. Healthcare Sector Financing Program, providing necessary liquidity to finance: a. Improve the level of provided healthcare services. b. Develop medical centers and hospitals, and establish new departments. c. Preserve the medical staff and enhance the ability to attract expertise. d. Expand services to include chronic disease-related services and localized services. e. Purchase necessary medical equipment for healthcare services.
3. Agricultural Sector Financing Program, providing necessary liquidity to finance: a. Investment and development in the agricultural sector, including the use of modern agricultural technologies and improved production rates. b. Agricultural projects affected by political, economic, and environmental fluctuations. c. Development and investment in the food industry sector. d. Maintain the production cycle and target new agricultural projects. e. Apply modern sustainable agricultural practices to reduce environmental impacts from agricultural activities.
4. Renewable Energy, Efficiency, and Environmental Conservation Sector Financing Program, providing necessary liquidity to finance: a. Renewable energy production projects and electricity generation using solar cells and other environmentally friendly means. b. Sectors and projects aimed at reducing pollution levels, conserving the environment, and achieving a higher level of self-sufficiency. c. Transition to clean energy sources, reducing reliance on traditional energy sources, and minimizing greenhouse gas emissions with negative environmental impacts. d. Projects aimed at reducing consumption and improving energy efficiency across various sectors such as construction, industry, and transportation. e. Energy storage projects.

Article (5) Credit Ceilings and Repayment Periods

Banks must comply with the maximum credit ceiling and repayment periods outlined in the table below:

Liquidity Provision Programs	Financing Ceiling per Project	Repayment Period	Grace Period
Program			Grace period is included in the repayment period
Recovery Program for Affected Projects	Very Small Enterprises: 200,000 shekels	(5) five years	(12) twelve months
	Small Enterprises: 400,000 shekels
	Medium Enterprises: 600,000 shekels
	Large Enterprises: 2 million shekels
Healthcare Sector Financing Program	20 million shekels	(8) eight years	(24) twenty-four months
Agricultural Sector Financing Program	5 million shekels
Renewable Energy and Environmental Conservation Sector Financing Program	20 million shekels

Article (6) Credit Granting Conditions

1. When granting credit to the targeted economic sectors, banks must comply with the following conditions: a. The borrower must be Palestinian, and the financing must be used exclusively in Palestine. b. The project or establishment must be a registered client and licensed by the competent authorities, or possess a tax file. c. Project owners must have sufficient expertise and knowledge in the field of financing purpose, and the project aims to expand existing operations or open new production lines; if it is a new project, financing must not exceed 50% of the total project cost. d. A report on damages resulting from political and economic crisis impacts, along with evidence of the financing's role in addressing these impacts, must be provided, as well as proof of the project's importance in contributing to sustainable development. e. An environmental impact assessment study for projects related to the renewable energy and environmental conservation program must be provided. f. Studies and credit analyses for targeted projects must be conducted according to the bank's credit policy, ensuring that credit requests align with these Instructions. g. The bank must provide the Palestine Monetary Authority with the credit study prepared by the bank. h. The project must be technically and economically viable for continuation. i. The bank must take all necessary measures to reduce its credit risks, basing its credit study on expected project cash flows, considering the contribution of granted credit to achieving sustainable development and supporting the production cycle. j. Banks are prohibited from deducting cash insurance from the granted credit amount for targeted projects within the program. k. Credit granting approval requests must be submitted if the amount exceeds (400) four hundred thousand shekels, in accordance with Annex No. (1).
2. The bank must obtain the Palestine Monetary Authority's approval if the borrower is a related party.
3. Providing a recommendation from the Chamber of Commerce, the Union of Chambers of Commerce, or the Private Sector Coordinating Council serves as an additional advantage that facilitates project financing.

Article (7) Financing Programs Implementation Mechanism

1. Credit up to a ceiling of (400) four hundred thousand shekels is executed by the bank based on its credit decision, which complies with the credit conditions stipulated in these Instructions. The bank is responsible for notifying the Palestine Monetary Authority of the credit execution to transfer the amount to its account with the Authority, in accordance with Annex No. (2).
2. Credit exceeding the ceiling of (400) four hundred thousand shekels is executed after obtaining the Palestine Monetary Authority's financing approval. In this case, the bank must provide the Authority with all supporting documents and papers in accordance with Article (6) of these Instructions.
3. The Palestine Monetary Authority transfers the credit value if it is equal to or less than (400) four hundred thousand shekels within one business day, and transfers credit exceeding (400) four hundred thousand shekels within two business days after approving the credit request.
4. Installments are deducted from the bank's account with the Palestine Monetary Authority at the end of each month, taking into account the grace period granted to projects.

Article (8) Interest or Return and Fees

1. The bank must comply with the following: a. Grant credit at an interest rate or return of 5% reducing for all programs, in accordance with the periodic bulletin published by the Authority. b. The interest rate or return margin charged by the bank on credit, considering guarantee costs and cost of funds, must not exceed 2% annually.
2. The Authority issues a quarterly bulletin on the cost of funds charged to banks for this purpose.
3. The bank may charge a one-time credit granting fee, capped at 0.5%.
4. The bank may apply its pricing policy to irregularly repaid credit and charge late interest or returns on due installments in addition to the contractual interest, capped at 2% annually, provided this is included in the credit contract.
5. The bank is prohibited from modifying or changing interest rates, returns, or profit margins on granted credit.
6. The Authority may grant some beneficiaries of the financing programs in these Instructions cash back incentives, capped at 5% of the principal credit amount, after full repayment, in accordance with subsequent instructions issued by the Authority on this matter.

Article (9) Disclosure and Reports

1. The bank must provide the Authority monthly, in accordance with Annex (3), with the value of granted, outstanding, and repaid credit, portfolio risk level, employment level, production level, and any other data demonstrating the credit's contribution to sustainable development or maintaining/developing the production cycle or employment levels.
2. The bank must disclose credit granted from the Sustainability Fund (+) on the credit information system according to the specific coding for this purpose.

Article (10) Excluded Projects

Banks are prohibited from granting credit for any of the following purposes:

1. Personal and consumer loans in all forms.
2. Purchase of land and real estate in all forms, and housing improvement loans.
3. Any financial transactions not related to operational activities, such as those related to mergers and acquisitions, securities trading, and ownership changes, in addition to financing the purchase of trademarks and intellectual property rights.
4. Settlement of obligations, debts, and other similar activities.
5. Activities and projects outside Palestine.
6. Any projects related to alcohol and tobacco production, gambling promotion, lotteries, and similar activities.
7. Activities prohibited under prevailing legislation.
8. Projects benefiting from the Sustainability Fund at the time of application submission.

Article (11) General Provisions

1. The bank must maintain, at the end of each financial quarter, statistics on the economic sectors targeted by these Instructions.
2. The bank must verify that granted credit is utilized for the specified objectives and in accordance with the financing programs outlined in these Instructions, bearing full responsibility for any violation of granting conditions. The Authority may deduct the credit value from the bank's account upon discovering a violation of these Instructions.
3. The bank must document its right to apply its pricing policy on granted credit if it is proven that the credit was utilized contrary to these Instructions.
4. The bank must comply with Cabinet of Ministers Decision No. (11/115/18/Banking/M.) of 2021 regarding the definition and national classification of micro, small, medium, and large enterprises.
5. Islamic banks must comply with Sharia law provisions in credit execution procedures under these Instructions.
6. The bank must comply with the "Know Your Customer" instructions issued by the Authority.
7. Credit granted from the Sustainability Fund (+) is assigned a preferential risk weight of 50%.
8. Credit granted under these Instructions is denominated exclusively in shekels.
9. Applications are submitted and received through bank offices, branches, and the "Manasati" platform website. Banks are committed to promoting and marketing the programs and participating in advertising campaigns.

Article (12) Penalties

Anyone violating the provisions of these Instructions shall be penalized in accordance with the provisions of Law No. (9) of 2010 concerning Banks.

Article (13) Implementation and Enforcement

All competent authorities must implement the provisions of these Instructions, each within its respective scope. These Instructions apply as of their issuance date.

Issued in Ramallah, on: 29/11/2023

Dr. Firas Malhem Governor [Signature]

Ramallah & Al-Bireh Governorate - Palestine P.O. Box 452 | info@pma.ps | Fax: +970 2 2415310 | Tel: +970 2 2415251 | Postal code: P6160675 | www.pma.ps