We have reached an era where financial return by itself is no longer sufficient for many investors worldwide, yet impact investing has emerged as a powerful tool to drive change and offer investors profits while preserving the environment and being socially responsible. Individuals and institutions globally are now investing in causes and countries in which they are eager to create a positive investment impact, both financial and nonfinancial, addressing global issues that include but are not limited to climate change, women’s and youth empowerment, solving geopolitical challenges, poverty alleviation, ensuring healthcare access, supporting entrepreneurship, providing education, addressing unemployment, and furthering sustainable development.
Impact investment has attracted a wide variety of individual and institutional investors, including fund managers, development finance institutions, diversified financial institutions and banks, private foundations, pension funds and insurance companies, family offices, individual investors, NGOs, religious institutions, and corporates.
Palestine is indeed a case that merits impact investment by international and regional institutions, family offices, and foundations because it offers both financial and nonfinancial returns on investment. Despite this fact, not many impact investors have invested in Palestine. If we remove some of the risk perceptions and psychological barriers, Palestine is a pure case of profit with a purpose that gives decent returns combined with higher moral satisfaction when you measure impact investment in job creation, poverty alleviation, climate mitigation, and human development that provides dignity, decency, and hope for future generations. In a difficult and critical socio-economically challenged place such as Palestine, impact investing can leverage and transform the economy simply by investing capital in institutions and initiatives that provide financial return and make a social impact.
The Palestinian Economy
Palestine is made up of 5 million inhabitants, 70 percent of whom are under the age of 34. It is also endowed with a large diaspora of more than 8 million people spread throughout the Middle East, Europe, and the Americas. Those in the diaspora enjoy not only capital wealth but also human capital in terms of knowledge transfer, expertise, connections, networking, and mentorships with their home country and people. Their investment activities in Palestine have played an important role in Palestine’s economic development and job creation in various sectors such as tourism, agriculture, and small and medium-sized enterprises (SMEs). Yet, the diaspora engagement in Palestine is not massive, and we believe that impact investment could provide the right entry platform. Why invest in Bank of Palestine (BoP)? BoP offers a unique opportunity for investors to make an impact in Palestine. By investing in its capital, you are not only benefiting from financial returns but also contributing to all its impact investing activities and initiatives. BoP has a strong capital base with 230 million shares that are all publicly traded on the Palestine Stock Exchange, having a market cap of US$477.5 million (ISIN: PS1004112600, Symbol: BOP). It has a return on assets of 14.87 percent and a return on equity of 1.30 percent. Earnings per share reached US$0.33, and cash dividend yield is 5 percent, as per the financial results of the first half of 2023. Since its listing in 2005, the bank has been committed to distributing dividends to its shareholders annually, and it has adhered to this commitment even during the most challenging and critical time of the COVID-19 pandemic, unlike many banks and other publicly traded companies. It is easy to enter and exit your investment in BoP shares, and the bank’s team can assist investors in smooth entry and exit.
As part of its strategy to empower women and encourage them to actively participate in the various sectors of economic and social life, Bank of Palestine launched the Felestineya program to give Palestinian women access to banking services, protect their living standards, and create job opportunities.
BoP is involved not only in banking transactions but also in financial inclusion through its “Felestinya” women’s program that was launched in 2015 under the umbrella of financial inclusion and now operates under BoP’s sustainability department. The program provides financial and nonfinancial literacy programs and advisory services to almost 20,000 women every year, providing a one-of-a-kind Mini MBA program to businesswomen and entrepreneurs in partnership with the International Finance Corporation while working with the European Bank for Reconstruction and Development (EBRD) and other international multilateral development banks, offering loans to women to create more financial inclusion for this vital sector.
In addition, BoP is involved in youth financial and digital inclusion through its banking operations and by investing in non-technology startups and being an anchor investor in Ibtikar VC Funds 1 and 2. Ibtikar Fund 1 has invested in 34 companies, some of which had international investments and are working across the region, in Saudi Arabia, the UAE, the Americas, and Europe. Fund 2 invests in Palestinian founders wherever they are, as long as they have back offices in Palestine, which includes all diaspora Palestinians and 1948 Palestinians. BoP is working through its “Intersect Innovation Hub” and Ibtikar Fund to create an ecosystem for entrepreneurship and innovation in Palestine. It has sponsored and co-sponsored the flagship ICEP Conference (International Conference on Entrepreneurship – Palestine) to promote entrepreneurship in Palestine, in the region, and globally. Last year, ICEP was held in Dubai, UAE, at the Museum of the Future, in cooperation with Dubai Future Foundation and Dubai International Financial Center. This year, the bank is looking to go to Abu Dhabi to work with Hub 71 during Abu Dhabi Finance Week. Furthermore, there are plans to take ICEP to Silicon Valley and to Saudi Arabia in the next two years.
Bank of Palestine signing an agreement with Japan International Cooperation Agency (JICA).
In terms of green investments, BoP together with the National Aluminum and Profiles Company (NAPCO) founded Qudra, a solar energy company. Qudra aims to provide modern renewable energy solutions at low costs to Palestinian citizens, institutions, and companies. Moreover, among the bank’s distinctive programs in energy efficiency and renewable energy, it has partnered with Proparco (a development finance institution and a subsidiary of the French Development Agency focusing on private sector development) in a program called Sunref, which offers green loans to SMEs, aiming to boost the Palestinian economy and support sustainable green investment and COVID-19 economic recovery.
During 2023, BoP became the first bank in Palestine and the Middle East to deposit funds in Citi’s Sustainable Deposit Solution. Citi’s Sustainable Deposit Solution supports clients when they invest their excess cash and meet their sustainability goals. This enables the bank to indirectly support different sustainable financing projects across Citi’s portfolio, such as renewable energy, water conservation, healthcare, and education, as well as social projects that expand financial inclusion for women and traditionally underrepresented communities. A deposit of US$5 million is allocated to finance or refinance assets in a portfolio of eligible green and/or social finance projects based on the criteria set out by Citi.
Climate Risk Management Conference.
All these efforts are in line with BOP’s commitment to implementing a holistic sustainability strategy in accordance with international standards and best practices. This initiative was kicked off through a focus on governance. To enshrine this commitment, BoP established a sustainability committee at the board level, a dedicated sustainability team, and environmental, social, and governance (ESG) commitments across operations, including releasing the bank’s first sustainability report for the year 2021.
Climate Risk Management Conference.
There are also tools for measuring impact investing to ensure transparency and accountability through the Impact Reporting and Investment Standards (IRIS) and the United Nations Sustainable Development Goals (SDGs). These tools enable investors to assess the effectiveness of their investments and communicate their impact to stakeholders, fostering a culture of continuous improvement and shared learning.
BoP, together with the National Aluminum and Profiles Company (NAPCO), founded Qudra, a solar energy company.
BoP has long believed in collaboration and partnerships among various stakeholders: investors, entrepreneurs, government entities, civil society organizations, and international development agencies. The bank believes in the motto “Together We Impact” and works towards a sustainable future through its commitment and cooperation to build and enhance social and economic development. One of the many partnerships BoP is proud of is the investment of the Japanese International Cooperation Agency (JICA) in BoP’s additional tier 1 capital with an amount of US$30 million. This investment is a testament to the trust and genuine relationship between Japan and Palestine in efforts to grow the Palestinian economy and private sector through supporting SMEs and women.
Supporting SMEs, which constitute around 90 percent of the Palestinian economy, is in BoP’s DNA and was one of the bank’s missions back in 1960 when it was established. BoP has never shied away from lending to SMEs as it is keen on maintaining this vital sector, despite all the challenges that they face and those that face BoP as a lending institution. BoP has partnered with multilateral development banks and institutions such as the European Bank for Reconstruction and Development (EBRD), the French Development Agency (AFD)–Proparco, the European Investment Bank (EIB), KFW, and the Arab Fund for Social and Economic Development, to better serve this vibrant segment, including technical assistance to both the bank and final beneficiaries.
BoP was the first Palestinian bank to become a member of the Global Impact Investing Network (GIIN), the largest global community of impact investors dedicated to increasing the scale and effectiveness of impact investing. The bank is also a member in the UN Global Compact, World Economic Forum (WEF), Global Alliance for Banking on Values (GABV), Global Banking Alliance for Women, Palestine Green Building Council, and the Middle East Investor Relations Association (MEIRA).
Looking ahead, BoP seeks a growing shift towards a more inclusive and responsible global financial system that addresses impact considerations of investment strategies. Yet it needs cooperation from the region and the world to consider Palestine as a country for their impact investments.
Impact investing is not just a trendy financial topic; it is essential for social change, economic growth, inclusivity, sustainability, and the empowerment of the Palestinian people and the world. Working hand in hand, impact investing in Palestine will play a pivotal role in fostering our economic resilience and development in all aspects.