Jordanian Banking Sector: A 25-Year Journey of Growth, Innovation

Amman: Jordan's banking sector has experienced a transformative period of growth and development under King Abdullah II's leadership, significantly enhancing its position within the local, Arab, and regional financial arenas. This evolution has unfolded in tandem with the overall growth of Jordan's economy, with the Central Bank playing a pivotal role in steering the sector towards stability and innovation. The introduction of Banking Law No. 28 in 2000 was a watershed moment, advancing the sector through the adoption of the comprehensive bank concept and facilitating the merger of investment banks with commercial banks. This legislative shift has been pivotal in redefining the banking landscape in Jordan. By the end of 2023, the number of banks operating within the Kingdom was recorded at 20, which includes 15 Jordanian banks listed on the Amman Stock Exchange. This composition reflects a diversified banking ecosystem encompassing three Islamic banks and five foreign banks, one of which is an Islamic ban k. Over the past 25 years, the sector's geographical footprint has notably expanded, with the number of bank branches doubling from 463 in 1999 to 941 in 2022. The sector's global reach now extends across five continents, with a notable presence of 195 foreign branches, five representative offices, 23 offices, and two offshore units. This expansion has significantly contributed to Jordan's economic openness and integration into the global economy. Maher Mahrouk, Director General of the Jordanian Banks Association, emphasizes the banking sector's growth, highlighting a remarkable increase in financial indicators. The balance of assets within the sector surged 5.7 times from JD11.551 billion in 1999 to JD65.518 billion by the end of November 2023, representing 194.5 percent of the GDP. This growth underscores the sector's pivotal role in Jordan's economic development. Foreign assets saw a more than twofold increase from approximately JD2.9 billion in 1999 to JD6.081 billion at the end of November 2023, wh ile local assets experienced an approximately sevenfold increase to JD59.437 billion, further evidencing the sector's robust growth and stability. The banking sector's deposits also experienced significant growth, with the balance multiplying about 5.6 times from JD7.5 billion in 1999 to JD43.292 billion by the end of November 2023. This growth reflects the enduring confidence in the Jordanian dinar and the financial system at large, with deposits constituting 128 percent of the GDP. Regarding financial strength indicators, the banking sector has demonstrated resilience and improvement. The capital adequacy ratio increased from 15.9 percent in 2003 to 17.4 percent in the first half of 2023. Concurrently, the non-performing debt ratio decreased from 15.5 percent in 2003 to 5 percent, accompanied by a significant improvement in the non-performing debt coverage ratio from 51.9 percent to 78.9 percent. Credit facilities provided by banks underscore the sector's essential role in supporting economic and comme rcial activities, with a 7.5 times increase from JD4.46 billion in 1999 to JD33.438 billion by the end of November 2023. This growth not only reflects the sector's capacity to support economic expansion but also its commitment to facilitating the private sector's development. Under King Abdullah II's leadership, the Jordanian banking sector has embraced modern banking concepts, aligned with international standards such as Basel II and Basel III, and introduced significant advancements in financial and payment systems. This transformative period has solidified the sector's foundation, contributing to Jordan's financial, monetary, and economic stability on a global scale. Source: Jordan News Agency