We’ll launch our first equity fund next year

Not many banks plant olive trees, but the Bank of Palestine has a social mission. It also has ambitious expansion plans, says chairman Hashim Shawa. He talks to George Mitton.

The interview begins with the discovery of a mutual acquaintance, the Palestinian lawyer and memoirist Raja Shehadeh. I am reminded of a trip to Ramallah in the west bank of Palestine in 2007, when the writer was kind enough to take my then-girlfriend and I on a tour of the hills surrounding his city, contrasting with bitterness the sprawling bungalows of the Israeli settlers with the cramped, hemmed-in towns of the Palestinians. “In Palestine,” Raja remarked, “town planning is political.”

It’s an environment Hashim Shawa, chairman of the Bank of Palestine, knows well. His company is based in the city and, unlike me, he knows not only Raja but the whole Shehadeh family.

I meet Shawa in an exhibition centre in Switzerland, the site, this year, of the Sibos banking conference. Shawa’s team has tried to recreate the atmosphere of the holy land at their conference stand. Beside us, a craftsman is engaged in building an oud, a stringed instrument similar to a lute that has a history going back thousands of years. On the stand’s walls are photos of orange groves, the bank’s symbol.

It is a symbol with personal resonance for Shawa. His grandfather, a farmer, founded the bank as a means of financing orange growers. Tragically, the farms were devastated in the 1948 Palestine War, during which the state of Israel was declared and thousands of Palestinians fled or were expelled from their homes, an event known in Arabic as the Nakba or ‘disaster’.

“The farming business was destroyed in the war,” he says. “What was set up as a side business ended up being the main business.”

Like other Palestinian enterprises, the bank has clung to life since then, trying to grow in one of the most politically challenging terrains on earth.

In the face of continued land grabs by Israel, Shawa feels his bank’s chief virtue is its resilience.

“We still live in an unjust military occupation,” he says. “We don’t have freedom. There is discrimination against Arabs and Palestinians. Ever since the creation of Israel, we’ve been fighting for our own recognition. We live under an apartheid regime.”

However, the bank has done its best to thrive in these tough conditions. Shawa lists some of its achievements: the Bank of Palestine is now the largest of the country’s banks with a 30% market share; in ten years it has increased its assets roughly eight times over to nearly $4 billion, which he says makes it the fastest-growing bank in the Middle East; in the same period, the bank’s shareholding by foreigners has increased from 10% to 35%.

“The shareholder mix has changed dramatically,” he says. “We have a lot more institutional and private investors from the Gulf. Emerging market funds, frontier market funds and endowment funds have been allocating a piece of their investments to Bank of Palestine because our story has started to get around.”

The bank has been expanding too. It opened a branch in the Dubai International Financial Centre (DIFC) this year, its first overseas, and plans to set up a representative office in Santiago, Chile, next year. Chile, he explains, is a country with a population of about half a million diaspora Palestinians.

The bank has tried new products too, such as a venture-capital fund aimed at supporting entrepreneurs in Palestine. Named after the Arabic word for innovation, the fund was seeded with $1 million of the bank’s money. It raised another $9 million in six months from institutions and high-net-worth investors around the globe,
many of them expatriate Palestinians who wanted to support their homeland.

Buoyed by the venture, Shawa now plans a bigger commitment to asset management.

“We’re looking to set up an equity fund focusing on Palestine, some time next year perhaps.”

An equity fund could come at a good time for Palestine, which was recently awarded frontier market status by index provider FTSE Russell. There are not many country-specific equity funds for Palestine. The Bank of Palestine previously promoted one of the few available, managed by Rasmala, to its clients.

However there is no doubt that the bank still operates in a difficult environment, one which the World Bank describes as a “fragile and conflict-affected state”. The hardships perhaps influence the ethos of the bank and of Shawa as an individual, who takes a personal interest 

in the bank’s charitable activities. Some weeks after the conference, the bank circulates an email to contacts met there to say that, for each of us, an olive tree has been planted in Palestine. “So you have contributed to green sustainability in the holy land and we thank you for this,” it reads.

Shawa also backs cultural causes. At a dinner in Lausanne for clients and friends of the bank, there is a performance by Le Trio Joubran, three brothers who each play the oud. Between songs, they declare with emotion their thanks to Shawa for supporting their careers. 

Indeed, there seem to be many well-wishers who want to see the bank succeed. One of the other attendees at the dinner, a Dutch representative of a European bank, tells me he supports the bank when he can, “because they need it”.

Shawa clearly wants the bank to grow on its own merits, however. His vision seems to be to create a respected, international business. If its ventures in Dubai and Santiago are successes, the bank may just achieve that.

And perhaps overseas expansion is a wise move for a company whose home country remains afflicted by unrest.

I am reminded of the climax of my tour of Ramallah in 2007, when we left the car to look at the Israeli West Bank Barrier, a 400-mile grey wall erected, supposedly, to keep out suicide bombers from Israel but which has severely restricted Palestinians’ movements and caused further loss of land. 

Looking at the barbed wire, the checkpoints and the settler-only roads, it seemed clear the Palestinians would need to rely on their famed quality of resilience for some time yet.

©2016 funds global mena

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