Yemeni Banking Sector Achieves a Step Forward [Archives:2002/05/Business & Economy]

January 28 2002

The value of deposits of the banking sector in Yemen totaled YR 280 billion against YR 50 billion in 1995 with the start of the implementation of the economic reform program. This is a pointer that Yemeni banks are now much safer than they used to be in the past couple of years. During the seminar on banks, held in Sana’a, for assessing the performance of banks, Ahmed Abdulrahman as-Samawi, President of the Central Bank of Yemen (CBY), said the banking monetary indicators confirmed the success of the structural economic reforms program, which the government started in 1995. As-Samawi indicated that the Yemeni government had been concerned over two different approaches in this respect: the first related to fixing the exchange rates and the second related to the issue of achieving a considerable reserve totaling USD 3.6 billion. As-Samawi showed to the participants some international certificates confirming the success of the financial reforms program adopted by the Yemeni government with regard to the performance of banks and the performance-monitoring achieved by the Central Bank of Yemen in comparison to that achieved by other banks.
Yemen scored 9.4 points out of 10 with regard to debt pointers, according to the Euromoney periodical. Similarly, based on the most recent report by the World Bank, Yemen’s bank-monitoring capabilities have substantially improved. The International Development Association (IDA) and the Central Bank of Yemen (CBY) enjoy one of the strong relations in the Middle-East. The CBY has been working since June 1997 to implement a financial and a legal reforms program for commercial banks, which included exemptions on taxes and income interests.
The value of deposits of the banking sector have soared from YR 250 billion in 2000 to YR 280 billion in 2001 at an increase rate of YR 30 billion. The value of deposits totaled YR 190 billion in 1999.
Ahmed Mohammed al-Khawi, Chairman of the Banks Association, believes that the reforms program implemented by the banking sector in Yemen will contribute to the development of its staff and will make banks more capable of facing the changes in this sector. The workshop on banking sector in Yemen also discussed the final results of the efforts for establishing a stock market exchange in the country as the committee entrusted with conducting the study related to that has completed drafting the law concerning it.
Despite the success accomplished by the banking sector in Yemen there are still some criticism accusing commercial banks of not financing investment operations through foreign banks plus purchasing treasury bills with the view of achieving fast profits. Yemeni banks’ accounts at foreign banks are estimated at YR 32 billion; while, commercial banks allocates YR 13.3 billion for domestic debits. However, the banking sector in Yemen is still suffering from the clients’ inability to pay back their debts. And this has forced the government to liquidate the assets of the industrial banks, as well as privatizing its share at the National Bank of Yemen. Yet, some sources at the banking sector expect an increase in the flow of deposits to Yemeni banks, mainly from the Yemeni immigrants based in the Gulf countries, countries of Southeast Asia and East Africa.