Between Salary and Installment: What Do Loans Say About the Palestinian Economy?

In an economy burdened by fragility, it is not enough to ask about the size of loans; we must start with the people living under their weight. According to the 2024 Financial Stability Report issued by the Palestinian Monetary Authority, the percentage of borrowers to the adult population was about 18% in 2024, with 14% for males and 4% for females. This means, in everyday language, that a wide segment of Palestinians manages their month on a steady rhythm: a salary comes in, an installment goes out, and what remains is left to face a market where costs keep rising. Hence, the loan file is not merely a banking matter but transforms into a mirror of an economic situation where credit, for many families, is part of the mechanism for adapting to economic hardship.
This perspective entirely changes the narrative. When borrowing is a phenomenon affecting a significant percentage of adults, the real question is not only: How much do people borrow? But also: Why do they borrow, and where does this funding go? In healthy economies, credit is supposed to be a bridge to the future; in the Palestinian context, it often appears closer to a temporary lifeline that families cross over a widening gap between limited income and high living costs.

Figures from the Monetary Authority reveal that the image of Palestinian credit is more complex than the prevailing general impression. Within the resident private sector portfolio, corporate loans accounted for about 54.0% of the total portfolio, amounting to nearly 4.9 billion dollars, while individual loans constituted about 44.6%, roughly 4.1 billion dollars. On a broader level, the Financial Stability Report shows that the share of credit directed to households reached 37.4% of total credit facilities in 2024, compared to 38.0% in 2023, while lending to households decreased by about 3.0% to around 4.4 billion dollars. However, this decline does not necessarily mean that families have become less in need of borrowing; it may also reflect some borrowers reaching their borrowing capacity limits or banks becoming more cautious in a higher-risk environment.
But more important than the abstract percentages is the nature of this credit. When personal lending retains such a significant weight in a weak-growth economy with limited monetary sovereignty and burdened by shocks, the question becomes valid: Does the funding go towards creating new productive capacity, or does it serve to stabilize consumption and postpone a crisis? The consumer loan does not always seem, in the Palestinian context, to express welfare or luxury spending; it often serves to cover education, health, housing, and basic obligations, i.e., to bridge a gap in income rather than to support excessive spending behavior. Nevertheless, the economic outcome remains the same: a significant portion of future income is consumed in advance, not to expand the production base but to protect the minimum level of living stability.

The picture becomes even clearer when we include public sector employees in the scene. The Monetary Authority indicates that credit extended to public sector employees reached about 2.0 billion dollars in 2024, an increase of 5.0% over the previous year, representing about 16.3% of the total credit portfolio. This is not an isolated banking figure but an indicator of how intertwined household credit is with public financial conditions. This group relies significantly on the regularity of government salaries for its repayment capacity. When these salaries are delayed or cut, the danger is not limited to the borrowing family alone but extends to the quality of the credit itself.
The picture becomes more complicated when we move from the structure of loans to the financial pressure accompanying them. The annual report of the Monetary Authority shows that shekel-denominated facilities constituted 48.9% of total facilities in 2024, compared to 40.8% in US dollars and 8.9% in Jordanian dinars. This is not a mere technical detail. The Palestinian borrower often repays in shekels, receiving income in many cases also in shekels, but consumes in a market affected by the dollar's movement and external prices. Hence arises a silent imbalance: the installment remains nominally fixed, but its real cost inflates as the purchasing power of income erodes. This means that the problem is not always in the rising value of the installment itself but in the shrinking amount left from the salary after payment.
This is what makes reading loans through official delinquency indicators alone an incomplete perspective. The Monetary Authority points to an increase in non-performing loans to about 606.4 million dollars in 2024 and a rise in their ratio to total loans to 5.08%, compared to 4.49% in 2023 and 4.29% in 2022. This increase not only reflects a deterioration in the quality of some credit portfolios but also indicates that the economy's capacity to bear debt is no longer as robust as it once was. However, what this percentage does not reveal is the vast space between "regular repayment" and "financial comfort." A borrower may remain committed to the installment monthly, but sometimes does so by curtailing basic spending or deferring necessary expenses.
For this reason, it seems more accurate to talk about a silent depletion of income, rather than just visible delinquency. The bank's success in collecting the installment does not necessarily mean that the family is doing well, just as a decrease in delinquency does not automatically prove the sturdiness of living conditions. In the case of public sector employees in particular, regular repayment may conceal greater fragility under the pressure of unstable salaries and volatile living costs.

From a deeper perspective, the issue is not only about the health of the banking sector but also about the role of credit in the Palestinian economy. If a significant portion of loans goes to individuals and families to cover living obligations, and if a substantial part of this circle is linked to public sector employees and public financial conditions, then the question that should be clearly posed is: Does credit truly support the Palestinian economy, or does it compensate for its structural weaknesses? The answer likely lies somewhere between the two. Credit alleviates immediate bottlenecks but simultaneously becomes a compensatory tool for the lack of sufficient productive growth and income shortages.

Therefore, serious discussions about loans should not be reduced to calls for tightening or expanding lending but should redirect the compass: towards credit that is more connected to production, more sensitive to the capacity of income to bear costs, and more aware of the effects of currency fluctuations and economic volatility on the lives of borrowers. Ultimately, the issue is not just that Palestinians are borrowing; rather, borrowing itself has become a compensatory function for a segment of the population in an economy unable to provide them with sufficient income and stability. And when nearly one in five adults is within this circle, the loan surpasses being merely a financial contract between a bank and a customer; it transforms into a highly indicative marker of the limits of the economy's ability to protect people from the monthly burden of installments.