The Jordanian banking sector benefits from a growing economy and refocuses on core activities

The sector has undergone tremendous progress during the past decade, with the recent round of developments -most notably the capital increases- being of significant impact in terms of sector development.

The importance of the Jordanian banking sector surpasses its position as a main contributor to the Kingdom's Gross Domestic Product, a chief employer in the private sector and the one with the largest capitalization on the Amman Stock Exchange and extends to its role as a main driver of the economy and one of its longstanding pillars. Jordan's lack of substantial natural resources and absence of viable agricultural and industrial sectors, along with a comparably well-educated workforce dictated that the services sector assume an important standing in the local economy, with financial services taking the lead.

A new sector report, 'The Jordanian Banking Sector' was released by the Arab Advisors Group's Financial Markets Strategic Research Service on July 4, 2007. This report can be received from the Arab Advisors Group free of charge. The 44-page report provides a comprehensive background on the Jordanian Banking Sector, a brief on listed banks and key stakeholders, a comparison of the bank's Key Performance Indicators and the sector's outlook.

'The Jordanian economy witnessed exceptionally high levels of growth in recent years due to booming regional economies, a surge in foreign capital inflows, expatriates and their remittances, an expansionary monetary policy and the rise (and subsequent fall) of the Amman Stock Exchange.' Mr. Shadi Nino, Arab Advisors Research Analyst, wrote in the report. 'The Central Bank of Jordan, which controls and regulates banking operations in compliance with new international banking practices, plays a vital role in ensuring a robust sector with sustainable growth'.

Owing to those reasons, licensed banks' total assets reached a new record level and reached JD 24.24 billion by 2006 year-end, up 14.9% over the corresponding figure of 2005. Credit facilities extended to the public reached JD 10.03 billion by the end of December 2006, while those extended to the Jordanian government reached JD 1.67 billion. Nonetheless, the Jordanian banking sector remains pinned against a number of key challenges, not the least of which are the issues of consolidation and service diversification. The Central Bank has been exerting efforts aimed towards consolidating licensed banks through raising capital requirements although this has seen little effect towards that outcome.