Palestinian Banking under Pressure: Apparent Growth and Structural Imbalances in Deposits and Facilities

In an extremely complex political and economic environment, the Palestinian economy faces compounded challenges including movement restrictions, a decline in productive activity, and elevated risk levels. At the heart of these shifts, the banking sector emerges as a vital indicator that reflects economic dynamics and even helps shape them. Data published by the Palestine Monetary Authority for the years 2023–2025 and the start of 2026 present a dual picture: apparent stability and continued growth on one hand, and a deep structural imbalance in the distribution of resources on the other.

First: Stability of deposits and public confidence

The data indicate continued public confidence in the banking system, with customer deposits amounting to approximately 16.99 billion dollars by February 2026, compared to 16.8 billion dollars at the end of 2025 and 15.42 billion dollars in 2024. Despite the slight decline in 2024, the overall trend remains upward, reflecting the absence of financial panic behavior or mass withdrawals of deposits even amid crises (Table No. 11).

However, this stability conceals a clear geographic concentration: about 85% of deposits are concentrated in seven governorates in the West Bank. Ramallah and Al-Bireh lead this distribution with a steady share of about 40%, with their deposits in Q3 2025 amounting to approximately 6.5 billion dollars out of 16.376 billion dollars.

The remainder of deposits are distributed among the other six governorates as follows:

• Nablus: 2.242 billion dollars (13%)
• Hebron: 1.797 billion dollars (11%)
• Bethlehem: 1.236 billion dollars (8%)
• Jenin: 1.175 billion dollars (7%)
• Tulkarm: 779 million dollars (5%)
• Qalqilya: 366 million dollars (2%)

This distribution reflects the concentration of economic and institutional activity in specific areas, which reinforces the centrality of the financial system.

Second: Growth of banking facilities with severe concentration

Total banking facilities rose to 12.83 billion dollars in February 2026, compared to 12.59 billion dollars at the end of 2025, and by 642 million dollars over 2024. In the West Bank, the balance of facilities in Q3 2025 was about 11.87 billion dollars, compared to 11.05 billion dollars in the same quarter of 2024, an increase of approximately 815 million dollars.

Despite this growth, the geographic distribution reveals an even greater concentration than that of deposits, with seven governorates accounting for 92% of banking facilities; Ramallah and Al-Bireh are at the forefront with a 64% share (about 7.59 billion dollars in Q3 2025).

Most strikingly, this governorate alone accounted for about 97% of the increase in facilities between Q3 2024 and Q3 2025 (around 784 million dollars out of a total 809 million dollars). By contrast, other governorates experienced declines in facilities, such as:

• Hebron: decrease of 8 million dollars
• Jenin: decrease of 5 million dollars
• Qalqilya: decrease of 9 million dollars

While Nablus recorded only a limited increase of 48 million dollars.

Third: an increasing bias toward financing the public sector

The data reveal a clear shift in banking financing priorities. Facilities provided to the public sector rose from 2.72 billion dollars in Q3 2024 to 3.345 billion dollars in Q3 2025, an increase of 625 million dollars (growth of 23%). Thus the public sector captured about 78% of the total increase in facilities.

By contrast, private sector facilities increased only modestly from 9.285 billion dollars to 9.466 billion dollars, an increase of only 181 million dollars (growth of 2%), representing 22% of the total increase.

A breakdown of the increase shows that: the Palestinian government captured 620 million dollars of the increase, local authorities 5 million dollars, versus only 181 million dollars for the private sector.

This trend reflects a banking preference for financing the public sector, whether due to risk considerations or the nature of the economic environment, but it comes at the expense of financing investment and production.

Fourth: sectoral shifts toward consumer and service financing

At the sectoral level, the data show a shift in the structure of bank financing. Facilities to key productive sectors have declined, most notably:

• Real estate and construction: (decrease) 59 million dollars
• Land development: (decrease) 96 million dollars
• Agriculture and food processing: (decrease) 9 million dollars
• Industry and mining: (slight decrease) 1 million dollars
• Financial services: (decrease) 22 million dollars
• Vehicle financing: (decrease) 58 million dollars

Conversely, facilities increased in other sectors:

• Trade: domestic and foreign — increase 29 million dollars (most of the increase in domestic trade)
• Tourism and hotels: increase 6 million dollars
• Transport and communications: increase 22 million dollars
• Consumer and business services: increase 140 million dollars
• Other services: increase 103 million dollars
• Consumer loans: increase 23 million dollars
• Other unspecified items: increase 184 million dollars

·        This shift indicates that banks are moving toward short-term and lower-risk financing at the expense of long-term productive sectors, which may weaken the base for sustainable economic growth!

Fifth: a widening gap between the West Bank and the Gaza Strip

The data show a sharp geographic gap in the distribution of facilities, with the Gaza Strip’s share not exceeding 7% of total facilities in Q3 2025 (about 945 million dollars), compared to 93% for the West Bank. Facilities in Gaza also registered an actual decline of 9 million dollars compared to the previous year.

This reflects rising risks in the Strip, but at the same time deepens the economic disparity between the two parts of the homeland and limits opportunities for balanced recovery!

As for deposits in the Gaza Strip, they amounted in February 2026 to 5.17 billion dollars, while the deposits balance in the West Bank on the same date (month 2-2026) was about 17 billion dollars.... The deposits balance in the Gaza Strip in 2025 amounted to 5.06 billion dollars.. i.e., 23% of the total deposits in Palestine in 2025, while deposits in the West Bank were 77% of the aforementioned total.!

·        Overall, the Palestinian banking sector is not suffering from a liquidity or confidence crisis; rather, it shows a clear capacity to continue and adapt, as manifested in the growth of deposits and facilities. However, this quantitative stability conceals deep structural imbalances, represented by: a sharp geographic concentration of deposits and facilities, an increasing bias toward financing the public sector, a decline in financing productive sectors, and a wide gap between the West Bank and the Gaza Strip

·        The real challenge is not only to maintain financial stability, but to redirect the role of the banking sector to be an effective instrument in achieving balanced development. Continuing these imbalances could turn the current stability into a state of economic stagnation, instead of a foundation for a more inclusive and equitable developmental takeoff!