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Withdrawing Money from Libyan Banks: A Challenging Path as Al-Monitor Highlights Financial System Collapse

Written by Amira Cherni on . Posted in Reports. No Comments on Withdrawing Money from Libyan Banks: A Challenging Path as Al-Monitor Highlights Financial System Collapse

Published by: Al-Monitor on Wednesday

Libya’s financial crisis has forced many citizens to rely on payment cards amid the collapse of the financial system, following over a decade of instability and war. According to Al-Monitor, cash withdrawals have become an arduous process, with long queues of hundreds of people waiting outside heavily guarded banks. Often, cash reserves run out early due to severe liquidity shortages.

Lack of Trust in the Banking System

The report highlights that mistrust in the financial system has led Libyans to hoard cash rather than depositing it into banks. Currently, banks limit withdrawals to 1,000 Libyan dinars (approximately $206) per transaction. This mistrust exacerbates delays in the payment of salaries to government employees, who make up the majority of Libya’s workforce.

Transition to Digital Payments

In cities like Misrata, a significant coastal and commercial hub, the population of 400,000 is increasingly turning to bank cards. However, this shift is not without hurdles. The scarcity of ATMs and the lack of card payment acceptance among vendors pose challenges to a cashless economy.

A Misrata resident mentioned that using payment cards has simplified shopping, reducing the need to carry large sums of cash.

A Divided Central Bank

Political turmoil has further fragmented Libya’s financial institutions. Since 2014, competing factions have printed multiple versions of 50-dinar banknotes. To combat counterfeit currency, the Central Bank of Libya announced the withdrawal of these notes in April, initially setting a deadline of August but later extending it to the end of the year.

The withdrawal of these notes has added another layer of complexity. Musab Al-Haddar, a 45-year-old teacher, expressed frustration over shops refusing the old 50-dinar bills.

Addressing the Crisis

To alleviate the current crisis, the Central Bank of Libya injected 15 billion dinars into the economy in late October and urged banks to expedite the issuance of payment cards. However, achieving a seamless transition toward digital transactions requires addressing systemic challenges, such as increasing ATM availability and equipping vendors with card payment devices.

Exclusive: The Central Bank Issues Regulations to Facilitate Salary Disbursement Before Reaching Banks – Details Below

Written by Amira Cherni on . Posted in News. No Comments on Exclusive: The Central Bank Issues Regulations to Facilitate Salary Disbursement Before Reaching Banks – Details Below

Our source has obtained a circular issued by the Central Bank of Libya to commercial banks regarding regulations for setting purchase limits based on individual salaries. The goal is to facilitate salary disbursement before funds are deposited into banks and to promote electronic payments.

The regulations stipulate that banks must establish purchase limits through electronic payment services they offer, such as electronic cards or mobile applications.

The limit granted to customers is considered a form of Qard Hasan (interest-free loan) and is subject to all its rules, terms, and Sharia-compliant regulations. Key conditions include:

  • No commissions, whether fixed or percentage-based, are to be charged on the overdraft amount.
  • Customers must not be required to subscribe to additional services to receive the limit.

The service is to be offered upon customer request through bank-specific mobile applications, SMS services, or signed forms that outline all product terms and conditions, approved by the bank’s Sharia supervisory board.

Each bank is required to establish policies and regulations for the service, including identifying target beneficiaries, service terms, and the procedures needed to safeguard the rights of both the bank and its customers. Banks may impose conditions for eligibility, restrict usage cases, set specific loan ceilings, or link the limit to the salary value, provided these conditions do not conflict with the bank’s financial policies or legal regulations.

The service is available to bank customers with active current accounts who have been receiving regular salary deposits for at least six months.

The granted limit must not exceed 60% of the net salary after deducting any installments or obligations. The used amount is automatically deducted from the limit when the salary is deposited, and the limit is renewed automatically unless either party decides otherwise.

The bank’s board of directors and Sharia supervisory board must approve the policies, product guidelines, terms, and models, ensuring compliance with regulations issued by the Central Bank of Libya.

Banks are also authorized to take all necessary technical and legal measures to recover their dues in cases where customers fail to prove insolvency. Additionally, banks may refuse to provide a Qard Hasan to clients with a history of defaults or other issues, as determined by approved policies and regulations to mitigate risks.

In light of this, the Central Bank has urged commercial banks to launch the product and prepare their systems to enable the use of these limits for electronic payment transactions in compliance with the aforementioned terms and regulations.

Exclusive: Central Bank Sends 15 Million LYD to Kufra – Allocation Details

Written by Amira Cherni on . Posted in News. No Comments on Exclusive: Central Bank Sends 15 Million LYD to Kufra – Allocation Details

The Central Bank of Libya revealed in an exclusive statement to our source that it has dispatched 15 million LYD in cash to the southeastern city of Kufra.

The allocation includes 7 million LYD designated for branches of Wahda Bank, 4 million LYD for the safes of North Africa Bank branches, and 4 million LYD for Jumhouria Bank.

This transfer was made under the directives of Central Bank Governor Naji Issa and his deputy. The shipment has just departed from Tripoli.

Mohammed Abu Snina: Analyzing Key Financial Indicators of Banks for Q3 2024

Written by Amira Cherni on . Posted in Economic articles. No Comments on Mohammed Abu Snina: Analyzing Key Financial Indicators of Banks for Q3 2024

Economic expert Mohammed Abu Snina wrote an article in which he stated:

“Some pages on social media have circulated the information regarding the increase in the profits of commercial banks combined, during the current year until the end of the third quarter of the 2024 fiscal year. These profits reached 1.639 billion dinars, compared to 668.0 million dinars at the end of the third quarter of 2023, marking an increase of 145.4%.

The financial and objective assessment of this indicator, in order to judge the soundness of the banks’ performance, requires consideration of other related indicators. The most important of these indicators is the extent to which commercial banks have maintained sufficient provisions to cover doubtful debts, and the adequacy of these provisions. In other words, the size of the provisions gap as shown in the consolidated financial position of the commercial banks.”

The report indicates that the coverage ratio of provisions for doubtful debts to total non-performing loans stood at 58.6% at the end of the third quarter of 2024. This means that the provisions gap amounts to 41.4%. It would have been better if the banks had allocated a larger portion of their income to form more provisions to strengthen their financial position and reduce the gap. However, the banks preferred to announce large profits at the expense of forming adequate provisions to cover their non-performing debts, despite the fact that non-performing loans still exceed 20% of the total credit portfolio.

Another important indicator when evaluating the profits achieved by the banks is the source of income that led to these profits. Banks generally focus on increasing income derived from their core business, which mainly consists of the loans and facilities they provide within their primary role of financial intermediation—using deposits for financing and creating credit. In this regard, the report indicates that income-generating assets are low, accounting for less than 20% of total assets, which reflects the weakness or low utilization of funds by commercial banks.

Another notable observation is the increase in the balance of overdraft accounts with correspondent banks (abroad), which are accounts denominated in foreign currency. The report shows that the overdraft balance increased from the equivalent of 181.2 million dinars at the end of the third quarter of 2023 to the equivalent of 763.5 million dinars, an increase of 421.4% by the end of the third quarter of 2024. The report attributes this relatively large overdraft balance to the delay in settling accounts with correspondent banks, exposing them to interest payments that will reduce their expected profits by the end of the fiscal year, in addition to the risks associated with the rising exchange rate of the US dollar.

In conclusion, the profits announced at the end of the third quarter of 2024 should be viewed with caution, as they came at the expense of obligations that banks should not have ignored. Furthermore, most of these profits are a result of fees and commissions imposed by banks on their customers, rather than from financing activities related to their core operations.

Radio France: American and British Banks Are Not “Stupid” and Know That the Interim Governor Was Appointed Through Coup and Violence

Written by Amira Cherni on . Posted in Reports. No Comments on Radio France: American and British Banks Are Not “Stupid” and Know That the Interim Governor Was Appointed Through Coup and Violence

Radio France reported today, Wednesday, that American, British, and European banks remain hesitant to deal with the Central Bank of Libya. These banks are not “stupid”; they are well aware that the interim governor was appointed unilaterally through a coup and violence.

Jalel Al-Harchaoui, a researcher at the Royal United Services Institute in London specializing in Libyan affairs, stated that what Dbeibeh presents as the interim governor of the Central Bank is not truly the case. The interim governor has control over the Libyan dinar systems but lacks access to the more critical assets, namely dollars, which belong to the Libyan people.

He continued: “Instruments like letters of credit, such as Libyan reserves abroad, are financial tools that this new governor cannot use. There are concerns about a very short-term shortage, and no one can predict how Libya will import essential goods in October.”

Paris-based international law attorney Majed Boudin stated that imports into Libya are completely banned, leading to a market shortage unless the international community acts quickly to resolve the issue.

He emphasized the importance of reorganizing resources from oil fields, which pass through the National Oil Corporation and are then deposited into the Central Bank to fund the economy and pay salaries.

According to Boudin, this destabilization benefits certain countries, such as Russia, which is a major beneficiary of smuggled Libyan oil, as well as China and Iran, which present themselves as alternatives in the parallel market in case of shortages.

The attorney added: “Consumer products will be replaced through these unexpected gains from oil smuggling with other products. For example, we could replace suppliers of this or that product from Europe with Russian, Chinese, or even Turkish suppliers. This is a geopolitical issue that needs to be resolved, especially since oil production, Libya’s primary source of income, is halted.”