Palestine Monetary Authority

PALESTINE MONETARY AUTHORITY

Instructions No. (03) of 2016

Concerning the Licensing of Specialized Lending Institutions in Palestine

Based on the provisions of Article (6) of Legislative Decree No. (9) of 2010 concerning Banks, and based on the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions, and in accordance with the powers delegated to us, and in the public interest, we have issued the following Instructions:

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Article (1)

Definitions

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

• Authority: The Palestine Monetary Authority.
• Governor: The Governor of the Palestine Monetary Authority.
• Specialized Lending Institution: A legal or corporate entity engaged in lending or financing activities, registered and licensed in Palestine in accordance with the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions.
• Board of Directors: The Board of Directors of the Specialized Lending Institution.
• Founders: Natural or legal persons who have submitted an application to the Authority for a license to establish a specialized lending institution.
• Executives: All individuals holding the position of General Manager or Regional Manager, their deputies and assistants, and persons bearing similar responsibilities regardless of their job titles within the specialized lending institution.

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Article (2)

Scope of Application

The provisions of these Instructions shall apply to specialized lending institutions operating in Palestine in accordance with the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions.

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Article (3)

Branches

A specialized lending institution may open branches only in accordance with the provisions of Decision No. (132) of 2011 on the Licensing and Supervision of Specialized Lending Institutions and these Instructions.

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Article (4)

Permitted Activities

A specialized lending institution may engage in the following:

1. Providing loans.
2. Providing financing in accordance with Islamic Sharia provisions, subject to prior approval from the Authority.
3. Issuing internal transfers for its clients for financing purposes only, and accepting them conditional upon their use for settling existing loans or financing for the client.
4. Issuing external transfers for its clients for financing purposes only, and accepting them provided they are executed through a bank licensed to operate in Palestine.
5. Accepting collateral for loans or financing granted in accordance with Authority instructions.
6. Opening accounts and investing funds at banks operating in Palestine in the name of the institution.
7. Opening accounts and investing funds at banks outside Palestine in accordance with Authority instructions.
8. Accepting loan repayment installments at the premises of the specialized lending institution in accordance with instructions specified by the Authority.
9. Accepting grants, donations, and assistance from local or external institutions, provided that the terms of these grants, donations, and assistance align with the institution's objectives and do not conflict with Islamic Sharia provisions if provided to companies engaged in Islamic financing.
10. Ensuring that the volume of lending and financing does not exceed total capital, and obtaining prior written approval from the Authority if additional facilities are desired.
11. Dealing with and owning real estate exclusively for the use of the specialized lending institution, not exceeding 20% of equity.

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Article (5)

Prohibited Activities

A specialized lending institution is prohibited from engaging in any of the following:

1. Providing other banking activities and operations other than lending or financing.
2. Establishing investment funds for trading on behalf of others.
3. Operating as a brokerage company in the Palestine Securities Exchange or in global financial markets.
4. Investing in and trading securities on behalf of the institution unless prior approval is obtained from the Authority.
5. Owning, selling, investing, leasing, or renting real estate and immovable property, including reclaiming owned or leased land, except those owned exclusively for the specialized lending institution or any property that vests in the institution due to debt default in accordance with the provisions of Article (4) paragraphs (11 and 12) of these Instructions.
6. Any activities not explicitly mentioned in Article (4) of these Instructions.

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Article (6)

Licensing of a New Specialized Lending Institution

The founders must submit a license application as follows:

1. The founders submit an application to the Authority to license a specialized lending institution in accordance with Annex No. (1).
2. Pay an application fee as follows:

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Article (7)

Licensing Procedures

1. The Authority shall review the application and respond in writing to the applicant within (30) days from the date of receipt regarding the completeness of the application, with the response specifying the deficiencies that must be provided to the Authority to adjudicate the application.
2. The applicant must complete the deficiencies within three months from the date of the response; otherwise, the application shall be deemed withdrawn.
3. The Authority shall make a decision on the applicant within (30) days from the date of application completion, and shall notify the applicants of its decision in writing via registered mail or any other suitable method, indicating initial approval or rejection, with reasons explained in case of rejection.
4. In case of initial approval, the Authority shall grant the applicant a period of six months from the date of initial approval to complete the procedures and requirements for obtaining final approval, and the Authority has the right to extend the period by another six months in cases of necessity and as required; thereafter, the approval shall be automatically revoked.

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Article (8)

Procedures and Requirements for Obtaining Final Approval

Applicants must do the following:

1. Invite the Authority for an initial inspection of the proposed premises to obtain its approval, in preparation for equipping it according to the Authority's requirements set forth in the Management Equipment Form attached to these Instructions.

2. Submit documents proving the actual payment of their shares in the capital structure approved by the Authority, and the accounts into which the amounts were deposited.

3. Appoint a certified public accountant to prepare and audit the institution's annual and semi-annual financial statements in accordance with the Authority's specific requirements.

4. Submit a statement of establishment expenses audited by an external auditor approved by the Authority, indicating the completion percentage of the incurred expenses according to the feasibility study.

5. Complete the company registration procedures in accordance with the Companies Law and other relevant laws in force in Palestine.

6. Nominate individuals to hold positions of General Manager, deputies, assistants, and directors of departments and branches in the institution, attaching their CVs and academic and professional certificates for each, for the purpose of obtaining the Authority's approval for their appointment.

7. Submit a suitable internal control and audit system, the final organizational and administrative structure, job descriptions and specifications, financial and administrative authorities, and work procedures for all departments of the institution.

8. Provide a financial and accounting system capable of covering all institution activities and meeting the Authority's specific requirements.

9. Deposit a cash deposit in an account with the Authority as follows:

   • Non-profit Private Joint Stock Company: USD 20,000.
   • Profit-making Private Joint Stock Company: USD 50,000.
   • Public Joint Stock Company: USD 100,000.

The Authority may use the deposit in cases where the specialized lending institution fails to pay its due fees, commissions, and fines, provided that the institution subsequently pays the deposit value up to the required amount; otherwise, the Authority may take appropriate measures to ensure the institution's compliance with the system and instructions, including applying the provisions of Chapters Seven and Eight of Decision No. (132) of 2011 concerning the licensing and supervision of specialized lending institutions.

10. Comply with the relevant laws, regulations, instructions, and legislation in force in Palestine.
11. Invite the Authority to complete readiness inspection procedures, in preparation for granting it final approval for its operational status.
12. Based on the readiness report, written final approval shall be granted.
13. Pay annual and fixed fees, as follows:

Legal Form	Headquarters	Branch
Profit-making Private Joint Stock Company	1. Fixed Fee: USD 4,000<br>2. Annual Fee: USD 2,500	Annual Fee: USD 1,000
Non-profit Private Joint Stock Company	1. Fixed Fee: USD 1,000<br>2. Annual Fee: USD 500	Annual Fee: USD 300
Public Joint Stock Company	1. Fixed Fee: USD 8,000<br>2. Annual Fee: USD 5,000	Annual Fee: USD 2,000

14. The institution that fulfills all conditions and requirements of the Authority shall be granted a license to operate for an unlimited period.

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Article (9)

Commencement of Operations

1. After granting final approval to the applicants, the specialized lending institution must commence its operations within a maximum period of (60) days from the date of granting this approval.

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