Banks and Investment Projects [Archives:2000/44/Business & Economy]

Banks play a significant role in activation of investment projects by opening letters of credit and financing investment and insurance trade. Therefore, success or failure of investment projects in Yemen is influenced by condition of banks and their assets. 
Businessmen attribute weakness of investment activities to recession of banks to support failing projects mainly because of delay in paying back outstanding loans to banks. 
Financing investment projects is also affected by the circumstances surrounding banks, their jobs and safety of legislation related to their activities and to other offices concerned with encouraging the private sector to practice its activities in all profitable domains.
Investors here think that re-evaluation of banks role in financing investment projects is related to performance of banks in terms of growth of gain and stability of revenue rate against unannounced reserves when financing investment projects. 
The main hurdle disabling banks from supporting  investment projects is the weak basis on which those banks are established. There must be a full study on the basic capital rate and the difficulties a bank may encounter. 
For this reason there has been a confusion in the specialization of banks working in Yemen. Most banks devote themselves to supply owners of projects and give up offering loans to local investors. According to the General Investment Authority about 40% of the licensed investment projects are still incomplete due to lack of fundings. 
Many traders and businessmen were encouraged to open banks in order to supply their letters of credit. This coincided with calls for free market economy which helped increase the number of banks. However, that did not help promote investment. 
Other than the Yemeni Central Bank and other governmental and commercial banks there are five private banks, three Islamic banks and four foreign banks. Most of these banks carry out their activities through opening letter of credit or money remittances. 
Such activities do not meet the needs banks were established to meet. Being investment institutions they should support investment projects and help their execution as well. 
Despite the fact that the YCB classifies many banks as private companies and thus raises the capital to YRs 1,000,000,000 as a minimum requirement to run a bank, no improvement in terms of enhancing investment has taken place. 
The withdrawal of banks from supporting and adopting investment projects has led to decrease in their profits to the extent that some of them were liquidated. 
To sum up, specialized and commercial banks could have been in better condition if they were established after careful and legal studies and made their main objective to support investment.

——
[archive-e:44-v:2000-y:2000-d:2000-10-30-p:./2000/iss44/b&e.htm]