West Bank and Gaza - Country Commercial Guide
Trade Financing

It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.

Last published date: 2021-10-26

Methods of Payment

Most local importers use letters of credit. U.S. firms should use contractual arrangements to ensure fulfillment of payment obligations, particularly when beginning a business relationship. Recently, however, American exporters have been demanding that payments be made in advance even for long-time customers with good credit history.

Small Business Administration loan guarantees enable small U.S. exporters to obtain financing through commercial banks, usually short-term (i.e. 12 -month) export working capital loans for single transactions. SBA’s international business trade loan program also offers small export trading and export-management companies long-term financing to compete more effectively and to expand or develop export markets.

For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.

Banking Systems

The Palestine Monetary Authority (PMA) has the power and responsibility to regulate monetary policies in the West Bank and Gaza. In the absence of a national currency, the PMA focuses on fiscal policy and regulating the banking sector, financial institutions, and money changers. It is the sole holder and manager of the Palestinian Authority’s (PA’s) and Palestinian public-sector entities’ foreign currency reserves. With 13 commercial banks comprising 357 branches operating in the West Bank and Gaza, the local banking sector has undergone rapid growth since the establishment of the PA in May 1994.  Israeli banks do not operate in the West Bank and Gaza. Banks operating in the West Bank and Gaza routinely deal in the Israeli shekel, Jordanian dinar, and U.S. dollar. Israeli shekels are preferred for retail business transactions, while Palestinians prefere U.S. dollar and Jordanian dinar-denominated savings accounts. At times, Israeli-imposed security restrictions on Gaza following the Hamas takeover in 2007 have created liquidity shortfalls there. Additionally, banks in the West Bank sometimes hold an excess of liquidity in shekels due to Israeli restrictions on the transfer of cash from Palestinian banks to the Israeli correspondent banks.

To offer Israeli shekel accounts, local banks must maintain correspondent relationships with Israeli banks. Discount Bank is the correspondent bank for Jordanian banks operating in the West Bank and Gaza, while Bank Hapoalim is the correspondent bank for Palestinian banks. Currently, the PMA and the Bank of Israel are working on creating  government-owned entities on both sides to replace the current correspondent banks. Most local banks currently have a relatively conservative lending approach, primarily because of lack of legal enforcements. Local banks generally offer savings and checking accounts; some do either personal or commercial lending or both. Most commercial and private lending is done on a short-term basis, of one-to-three years and one-to-four years, respectively, with shorter terms the norm. Firms often must secure loans with assets worth the full amount of the loan – or more – as collateral. The lending to deposit ratio is increasing but remains low at  66.6 at the end of December 2020 compared to 80 in regional markets. At the end of 2020, total deposits at local banks amounted to $16.5 billion. From the end of 2019 to the end of 2020, credit facilities increased by $1 billion to reach $10 billion. Banks provided the PA with loans amounting to $ 2.4 billion at the end of June 2021.

Foreign Exchange Controls

Under the Paris Protocol, the Israeli shekel, Jordanian dinar, and U.S. dollar are all legal tender in the West Bank and Gaza, although the Israeli shekel typically will serve as the means of payment for all purposes including official transactions.  Local banks may accept other currencies as a means of payment for any transaction. 

U.S. Banks and Local Correspondent Banks

The Bank of Palestine, Arab Bank, and The National Bank are the three largest banks operating in the West Bank and Gaza that have correspondent relationships with U.S. banks. All commercial banks operating in the West Bank and Gaza issue credit and debit cards to customers upon request and their use is increasing as more retail outlets  accept them. VISA and MasterCard are the leading credit cards in use.  Banks also issue special debit cards with limited balances for customers who want to make purchases over the Internet.