The Role of State Banks in the MENA Region

Abstract

In Middle East and North Africa (MENA), state banks played a less important role in the recovery as compared to several countries in Latin America and South Asia, as well as China, where state banks played a counter-cyclical role. When private banks started circumscribing credit, state banks stepped in. The impact of this counter-cyclical role has been widely acknowledged. For example, a recent issue in the economist contained a lengthy article on emerging country banking, acknowledging how state banks had played an important counter-cyclical role in many emerging countries. Given this recent experience, some MENA countries may decide to retain an important role for state banks, including reformist countries such as Egypt and Tunisia that had been privatizing state banks and allowing the entry of foreign banks over the last decade.