Strengthening Payments Systems in the West Bank and Gaza: Interview with Dr. Jihad Khalil Al Wazir, Palestine Monetary Authority
Payment and settlement systems are a core element of the economy. They allow the financial markets to function smoothly and individuals, firms and the government to receive payments and to pay for goods and services. The Palestine Monetary Authority (PMA) recognized the importance of modernization and oversight of the National Payments System (NPS) as part of the wider monetary authority responsibility of ensuring financial stability and expanding financial inclusion. The payments and settlement systems of Palestine dating back to 2009 were incomplete and weak, characterized by incomplete legal and regulatory frameworks, absence of automated clearing and settlement systems, and lack of a dedicated oversight agency. The PMA sought technical assistance from the FIRST Initiative, and have since adopted a National Payment System (NPS) reform. FIRST worked with the World Bank’s Payment Systems Development Group (PSDG) to finalize the draft payments systems law; develop oversight frameworks for electronic funds transfers (EFTs) and payment systems; and propose an implementation plan for the next phase of National Payment Systems reforms.
The Payment System Law was approved in November 2012. The Payment Systems Oversight Unit was then established in February 2013 to define legal and legislative frameworks, plan the policies and strategies of the PMA in managing risks in payment systems, expand payment services, provide a competitive environment for payment services, and coordinate with the banking system and payment providers. More recently, the PMA launched the ATM/POS National Switch in May 2015, which will enable the West Bank and Gaza to shift from a cash-based society to one that uses modern electronic payment methods.
Watch this recent interview with Dr. Jihad Khalil Al Wazir, Governor of the Palestine Monetary Authority, and hear how the FIRST-funded ‘Building National Payments System’ project has enabled their larger financial sector reform agenda. (Interview Date: June 10, 2015)
Dr. Jihad Khalil Al Wazir, Governor, Palestine Monetary Authority (Transcript)
Q1: What was the situation before the ‘Building National Payments System’ project and what led you to the partnership with FIRST?
Well, we were working on the National Payments Systems Project and one of the key weaknesses was the legal framework. So, the FIRST Initiative was very helpful to us in helping us develop the legal framework and it was very successful. We passed a National Payment law, which really put the basic legal infrastructure to allow us to have financial transactions secure and accepted in legal system.
Q2: How does the building National Payment Systems fit into your larger financial sector reform agenda?
Well, the National Payment System was a key pillar in our financial reform agenda; and having a payment system in the unique situation of Palestine was very helpful. In the sense that during crisis, the payment system, the RTGS, the national switch, was able to help us to deliver liquidity in dire circumstances, under very extreme stress of war. The banking system were able to deliver and to deliver the cash to the consumers in Gaza, in particular.
Q3: What challenges still lie ahead for Building National Payment Systems or in the larger sense, for Palestine's financial sector reform?
Well, the payment system is very important component of our financial stability. As we develop, the use of new technologies, mobile banking, the national switch, help deliver payments to the socially vulnerable sectors of our communities. This payment system is a key pillar, and it will help us advance the reform agenda in the banking system. It is a very important component of financial stability in Palestine.
Q4: Do you see any potential for future projects with FIRST? How do you think we could help you?
Absolutely! One of the unique situations that we face in Palestine is the existence of a series of crises. We have the normal banking crises that befall every jurisdiction. And so, developing the payment system and developing with FIRST Initiative a crisis management framework or toolkit. I think this idea could be expanded to other jurisdictions. And our experiences as unique as they are, unfortunately now are befalling other jurisdictions. Particularly in MENA region, where you have high political instability; you have a breakdown of financial systems; you have breakdown of government; you have political economy issues; and our approach to addressing all of these issues was very innovative and helped us steer the banking system and maintain financial stability under very tough circumstances. And I think a lot of the lessons that we've learned, could be adapted through the FIRST Initiative to be promulgated for other jurisdictions- particularly, in fragile states.