The European Bank for Reconstruction and Development (EBRD) has increased a trade finance line for Quds Bank by US$3mn, in a bid to boost imports and exports in war-hit Palestine.

Under the deal, announced on May 17, the EBRD has expanded the size of an existing line to US$15mn.

The agreement will widen trade finance access in Palestine and bring “much-needed support” to local importers and exporters, the EBRD says.

“The trade line increase comes at a crucial time for Palestinian businesses, particularly since the war in Gaza, which started in October 2023, is heavily impacting the Palestinian economy,” the EBRD says.

Quds Bank mainly uses the trade finance line for “imports of food and food commodities, medical supplies and equipment, industrial equipment and agricultural commodities from Europe as well as from Asia and the UK”, says Irina Tyan, a principal banker within the EBRD’s trade faciliation programme.

For years, Palestine’s economy has suffered from intermittent conflicts, high unemployment rates and trade barriers introduced by Israel following the 2007 takeover of the Gaza Strip by Hamas. The Islamist Group is designated as a terrorist organisation by the US, UK and the EU.

For well over a decade, Israel has imposed security checks at the Gazan border, hindering the flow of goods into and out of the market.

But the economic picture has deteriorated significantly since the latest conflict erupted, with at least 75% of Gaza’s population – 1.7 million people – being forcibly displaced and the poverty rate soaring.

According to the World Bank, Palestine has experienced “one of the largest economic shocks” in recent history.

Much of the turmoil has been felt in Gaza, where GDP plummeted by over 80% in Q4 2023, the World Bank said in a February report.

But the West Bank has also continued to suffer from the Gaza conflict and, in recent months, has been beset by falling consumer demand, declining trade volumes, and Israeli state controls limiting the movement of workers.

In the final three months of last year, the West Bank experienced a 22% downturn in its economy, data shows.

Quds Bank, the third-largest commercial lender in Palestine, first joined the EBRD’s trade facilitation programme (TFP) in 2019 and initially secured a trade finance line worth US$2mn.

A year later, the EBRD bumped the line up to US$7mn and, in 2022, increased it further to US$12mn.

The EBRD says such backing has helped preserve “the availability of trade finance” in the West Bank, propped up Palestinian imports and exports and enabled Quds to bolster correspondent banking ties.

“Since joining the TFP, Quds Bank has gained access to a community of more than 100 issuing banks and 800 confirming banks worldwide, expanding its correspondent banking network and international business opportunities. Quds Bank employees have also benefited from TFP workshops and training courses on trade finance developments and best practices,” it says,

Earlier this month, the EBRD extended a US$2mn trade finance line to another Palestinian-based lender, Arab Islamic Bank.

The multilateral institution said funding would be used to issue guarantees in favour of confirming banks for pre-export and post-import financing, and to aid private businesses with their trade finance activities.