Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

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Instructions No. 25 of 2020

Regarding the Amendment of Instructions No. 22 of 2020 Concerning the Small and Medium Enterprises Financing Program

Based on the provisions of Legislative Decree 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:

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Article (1)

Scope of Application

The provisions of these Instructions shall apply to all banks licensed by the Palestine Monetary Authority under the Ministry of Banking Affairs in Palestine, including Islamic banks.

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Article (2)

Definitions

The following words and phrases shall have the meanings specified below unless the context indicates otherwise:

• Original Instructions: Instructions No. (22) of 2020 concerning the Small and Medium Enterprises Financing Program.
• Program: Small and Medium Enterprises Financing Program.

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Article (3)

Amendment of Article (3) Provisions

1. Paragraph (1) of Article (3) of the Original Instructions is amended to read as follows:
   "The duration of the Program shall be (3) three years."
2. Paragraph (2) of Article (3) of the Original Instructions is amended to read as follows:
   "The bank shall repay the financing according to the agreed time schedules, with a maximum deadline at the end of 2023, or within the period determined by the Palestine Monetary Authority based on prior written approval."

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Article (4)

Amendment of Article (4) Provisions

The text of Article (4) of the Original Instructions is replaced with the following:
"The Program shall be implemented according to the following procedures and conditions:

1. The bank shall receive financing applications from the categories specified in Articles (6) and (10) of the Original Instructions, effective from the date of issuance until 2020/12/31, or until the full allocation of the designated financing is utilized, whichever comes first.
2. The bank shall conduct credit assessments for the targeted categories and projects, and must consider prevailing economic conditions and their impact on project cash flows.
3. The bank shall submit financing applications for targeted projects to the Palestine Monetary Authority as follows:
   a. The bank must verify the extent of the project's damage from the coronavirus crisis and its compliance with the Program's conditions.
   b. Applications for projects meeting the conditions in these Instructions shall be submitted using Forms (1) and (2).
   c. Applications for projects requiring an exception to the conditions in the Original Instructions or these Instructions shall be submitted using Forms (1) and (2), specifying the requested exceptions.
   d. The Palestine Monetary Authority shall review financing applications and notify the bank of its decision within a period not exceeding (5) five working days from the date of application completion.
   e. The bank shall submit a disbursement request for projects approved by the Palestine Monetary Authority, and the Authority shall transfer the financing amount meeting the conditions to the bank's account with it within (3) three working days from the date of the request.
   f. Financing payments (installments) shall be 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 the project."

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Article (5)

Amendment of Article (7) Provisions

The text of Article (7) of the Original Instructions is replaced with the following:

1. The bank shall conduct studies and credit analysis for targeted projects in accordance with its credit policies and ensure that applications align with the conditions stipulated in the Original Instructions and these Instructions.
2. The bank must take all necessary measures to mitigate its credit risks and base its credit assessment on the expected financial flows of the projects, considering the contribution of the granted financing in helping targeted projects recover from the crisis's effects and quickly return to the production cycle.
3. The bank is prohibited from deducting cash collateral from the financing amount granted to targeted projects under the Program.
4. The bank must ensure that the granted credit is utilized for the specified purposes and in accordance with the Program.
5. The bank must obtain prior written approval from the Palestine Monetary Authority for agreements designated to mitigate and avoid credit risks.

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Amendment of Article (8) Provisions

The provisions of Article (8) of the Original Instructions are amended so that the number of employees criterion becomes advisory only.

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Article (7)

Amendment of Article (9) Provisions

Paragraph (1) of Article (9) of the Original Instructions is replaced with the following:
"1. An annual interest rate of 0.5% reducing on financing granted by the bank, in case the bank wishes to bear credit risks, and an annual interest rate of 1% reducing on financing granted in case the bank wishes to benefit from the provisions of Article (5) paragraph (5) of these Instructions.
2. An annual profit margin deducted in advance at a rate of 0.5% reducing on financing granted by the Islamic bank, in case the Islamic bank wishes to bear credit risks, and an annual profit margin of 1% reducing on financing granted in case the Islamic bank wishes to benefit from the provisions of Article (5) paragraph (5) of these Instructions.
3. The Palestine Monetary Authority shall use the amounts collected from interest and profits obtained from banks and Islamic banks to mitigate risk volumes."

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Article (8)

Amendment of Article (10) Provisions

The text of paragraph (2/b) of Article (10) of the Original Instructions is replaced with the following:
"There is no obligation to on-lend the loan at an interest rate not exceeding 9% reducing."

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Article (9)

Implementation and Enforcement

1. All competent authorities shall implement the provisions of these Instructions, each within its respective scope, and any provisions conflicting with them are repealed. These Instructions shall apply from the date of their issuance.
2. Issued in Ramallah on this day, corresponding to 2/7/2020.

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AZZAM AL-SHWEIDI
Governor

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www.pma.ps

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