Financial sector is flounderingHow can banking reform without a stock market? [Archives:2005/828/Business & Economy]

March 28 2005

Mahyoub Al-Kamaly
Reasons for the floundering of financial reforms in Yemen, according to Yemeni businessmen, include factors that hamper banks carrying out their tasks. This has made reforms appear as if they are government-sponsored, and weaken opportunities of partnership and integration among all types of banks.

Some say reform is failing because of poor financial tools used by some banks, and confinement of their activities to deposits, without giving attention to the investment process. For example, there is no financial and banking partnership leading to the birth of a stock market in the country.

Under financial reforms that helped the central bank of Yemen to control the national currency and stability of its price, there are other challenges emerging.

While the central bank of Yemen believes it has taken positive steps towards the establishment of a stock market, some view the commercial and specialized banks activities as being an opportunity for rapid gain. This matter requires work for expanding those activities and taking care of investments.

Experts emphasize that establishment of a stock market in Yemen would help secure sustainable and stable profits. For this reason, the operation of financial reforms should target the banks towards investment and encourage them to establish a stock market.

Hence, there must be rationalization of investment and a policy of financial reforms in line with the general goals and in a manner leading to development in Yemen.

Part of that is the process of offering necessary facilities to expatriates and attracting their savings for the establishment of productive projects in Yemen.

Financial reforms must also be translated on the ground and should not be confined to legislations and studies. The matter needs for more practical steps so that banking reforms would yield and move investment in the country.