There is a certain elegance in numbers that
tell a story, especially if some economic wisdom may emerge from them. This is
why when the
Jordan Strategy Forum published a compendium of data related to
lending venues of the
private banks in Jordan from 2002-2022, several stories
were told in these twenty years in numbers.
اضافة اعلان
Individuals and consumer culture
The highest average level of lending as a
percentage of the total credit provided by banks in Jordan during 2002-2022,
was to individuals as consumption loans (car purchases, etc.) at 24 percent of
all credit. This shows that bank lending to the private sector favored
individuals.
Furthermore, if one is to look at the
period of high
economic growth (2004-2009), the average credit provided to
individuals was 28.3 percent of all lending, which also shows that with high
economic growth, people in Jordan overspend as optimism dominates the psyche of
both banks and consumers.
To further underscore this observation,
individual borrowing fell to 21.3 percent during 2010-2022, a period of dismal
economic growth rates. So, two short
novellas emerge from the numbers: Positive and negative expectations are
reflected in the borrowing patterns in Jordan, and negative or low per capita
economic growth affects the demand and supply of credit to individuals.
Amman stock exchange
How about the purchase of shares in the
Amman Stock Exchange? During 2004-2009, annual credit for the purchase of
shares grew by 59 percent per year. Such a high rate came from credit growth in
two years, 2004 when credit for purchasing shares jumped by 217 percent, and
2005, where it grew by 110 percent.
The credit for purchasing shares decreased
dramatically during 2006-2009 such that in 2008 and 2009 the credit decreased
by 2 percent and 1 percent, respectively. Bad, myopic, and sudden decrees
played a major role in destroying the sanguinity of the previous two years.
After that, from 2010 to 2022, the
average growth in credit for the purchase of shares was -5 percent, and no new company
registered in the stock exchange since. The story here is that some bureaucrats
work so hard to bring economic activity down.
In spite of this, during 2019-2022, lending
for the purchase of shares grew at an average of 32 percent per year as mining
companies did extremely well, and 2023 will see some adjustments in this
regard.
Industrial sector
Of course, there are many other stories,
especially related to lending to the
industrial sector. Loans to industry equated
to 12.5 percent of all credit extended by banks during 2004-2009. Note that it
was 15.3 percent in the previous two years. So, the good years worsened the
availability of credit for industry.
The most plausible story here is that since
the economic expansion favored the construction sector, the industry was
crowded out from the credit market since lending to construction is less risky,
easier to evaluate, and requires no specific or
specialized talents and
expertise like the credit to industry.
Construction and industry
During 2011-2022, the industrial sector's
access to credit, whether due to decreased demand by industry, or the increased
prudence by banks, was a mere 12.3 percent. This was markedly below the credit
to the
construction sector (24.1 percent during 2010-2022). The construction
sector was the clear winner in the boom years as its share in credit increased
from 15.1 percent during 2002-2003 to 16.8 percent in 2004-2009.
Hence, one may say that construction pushed
away industry in the good years and was the banks’ favorite in the slow years
due to its safety relative to other sectors.
Foresight and solutions
Those were some of the stories that the
numbers tell. Trade also suffered during 2010-2022, and so did agriculture
among others. To keep this article short, their stories will not be delineated
here. Clearly, there is room for
interventions by policymakers, should there be
a desire to improve the welfare of industry and other productive sectors.
Jordan need not wait; the solutions are clear and within reach.
Read more Opinion and Analysis
Jordan News
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