Are Palestinian banks asking for a credit collapse?

Once only the rich had access to home loans. Those days are long gone.
Written by Sonya James, Contributor

Mortgage lending at the Palestine Islamic Bank has risen to $40 million in the past five years. Forty million from nothing, that is.

According to Edmund Sanders of the Los Angeles Times, Palestinian banks are aggressively pushing mortgages and consumer credit onto a middle class population previously inexperienced with debt. The availability of mortgages and consumer loans instead of cash for the middle class is skyrocketing. From 2008 to 2011 it more than doubled - rising %40 since last year alone.

Basim Makhool, head of the economic consulting firm Creative Business Solutions, said:

"You can look around and see the impact of credit on the streets. All the cars are new. There's so much construction. The mortgages have had a good social impact because they are empowering people to improve their living conditions."

But above the glisten of new development looms the rumbling of a storm.

The Palestinian economy still runs primarily on government salary, international donations, and tax transfers from Israel.

The economic collapse in 2006 sprung from the international community and Israel cutting off money to the Palestinian Authority after Hamas won Palestinian elections.

If this happened again, those with rapidly rising personal debt would face serious risk.

Bankers believe the fear of political instability will detract the international community from allowing the Palestinian Authority's money to run out. And even though mass foreclosures and evictions remain all-American, it's hard to say whether betting against credit collapse in Palestine is, well, a good bet.

[via Los Angeles Times]

Images: hoyasmeg/flickr

This post was originally published on Smartplanet.com

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