Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (59) of 2019

Regarding Investment in Target Economic Projects

Based on the provisions of Law No. (9) of 2010 concerning Banks, particularly Article (18) thereof, In accordance with the powers delegated to us, And to achieve 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 Palestinian startups that contribute to economic growth, job creation, and the encouragement of innovation, creativity, entrepreneurship, and projects related to environmental conservation.

Article (2)

Scope of Application

The provisions of these Instructions 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 Palestinian startups whose objectives include engaging in agricultural, animal husbandry, industrial, alternative energy, or information technology activities that support innovation, creativity, and startups in the field of environmental conservation, subject to obtaining prior written approval from the Palestine Monetary Authority.

2. When investing in the aforementioned companies, banks must observe the following: a. Allocate and monitor an amount for investment in startups and establish a specific policy for investment in this type of investment. b. The bank's ownership period in the company must not exceed 10 years, and this period may be extended after obtaining prior written approval from the Palestine Monetary Authority. c. The objective of the investment in the company must be linked to the extent of the investment's impact on economic growth, job creation, and contributing 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 participate actively in the management and success of the company's business.

Article (4)

Documents and Records

If a bank wishes to participate in a Palestinian startup, it must apply for prior written approval from the Palestine Monetary Authority, attaching to the request the following data as a minimum:

1. 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 establish an exit plan from the 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 stating the reasons, justifications, and the objective of retaining the participation.
3. The value of participation in the capital of companies established in accordance with these Instructions shall be assigned a risk weight of 50% for the purpose of calculating the capital adequacy ratio.
4. The Palestine Monetary Authority may, as determined by instructions, allow the deduction of the bank's value of participation in the aforementioned companies from deposits subject to mandatory reserve requirements.

Article (6)

Repeal

All provisions conflicting with the provisions of these Instructions are repealed.

Article (7)

Implementation and Entry into Force

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

Issued in Ramallah on this day, corresponding to 20/11/2019

Supervision and Inspection Department Palestine Monetary Authority

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