Libya Financial Sector Review

February 2020

Preface and Acknowledgements

The Financial Sector Review represents a snapshot review of the Libyan financial sector which is based on a fact-finding mission to , Libya, in January 2019, discussions with leading participants in the financial sector, and desk research. The report is based on the limited information available about Libyan financial sector and is not intended to be a comprehensive assessment. The main objectives of the report were to take of developments in the financial sector of Libya, take a more structured approach to the World Bank financial sector support program in Libya and provide recommendations to the financial sector authorities in Libya on strengthening key areas of the financial sector.

The study was undertaken by a team led by Ms. Valeriya Goffe (Senior Financial Sector Specialist, World Bank). The team included Mr. Nicholas Smith (Financial Sector Specialist, World Bank), Mr. Rami Galal (Young Professional, World Bank), Mr. Ken Dorph (Consultant, World Bank), Mr. Mohaned Wefati (Consultant, World Bank), and Ms. Olga Monfiston (Consultant, IFC). The report was prepared under guidance of Mr. Jean Pesme (Practice Manager, World Bank) and Michael Schaeffer (Resident Representative, World Bank). This report captures the valuable comments and suggestions of peer reviewers Mr. Laurent Gonnet (Leader Financial Sector Specialist, World Bank) and Mr. Cedric Mousset (Lead Financial Sector Specialist, World Bank).

The team expresses sincere gratitude to the officials from the of Libya (CBL) for the excellent collaboration during the mission to Tripoli in January 2019 and the follow-up workshop in Tunis in September 2019 to discuss the draft version of the study. The greatly appreciates the close cooperation of HE. Saddek Omar Elkaber, Governor of the CBL. The team would like to underscore the excellent support provided by Dr. Abdulatif Altounsi (Director of the Governor’s Office), who facilitated the work on the study throughout its preparation. We are also grateful for the support from various people from different organizations, including regulatory authorities, financial institutions, private enterprises, and international donors the team met during the preparation of the report.

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Contents

Preface and Acknowledgements ...... 2 1. Executive Summary ...... 7 1.1. High-level Observations ...... 7 1.2. Key Recommendations ...... 10 2. Objectives of the Report ...... 13 3. Country Profile...... 13 3.1. Economic context...... 13 3.2. Business Environment ...... 20 4. Banking system...... 23 4.1. Financial sector overview ...... 23 4.2. The Central Bank of Libya ...... 26 4.2.1. Political background ...... 26 4.2.2. ...... 28 4.2.3. Foreign Exchange Management ...... 28 4.2.4. Banking supervision and oversight ...... 30 4.2.5. Information management ...... 30 4.2.6. Capacity building ...... 31 4.3. Commercial Banks ...... 32 4.3.1. Banking sector overview ...... 32 4.3.2. Deposit Composition ...... 34 4.3.3. Deposit Guarantee Fund...... 36 4.3.4. Credit extension ...... 36 4.3.5. Capitalization ...... 42 4.3.6. Households and individuals ...... 43 4.4. Payment systems and distribution networks ...... 48 4.4.1. Payment Systems ...... 48 4.4.2. National switch ...... 50 4.4.3. Architecture (POS, ATMs) ...... 51 4.4.4. Mobile banking ...... 53 5. Capital Markets ...... 55 5.1. The Libyan Stock Market ...... 55 5.2. Private Equity...... 56 5.3. Bonds and Sukuk ...... 57

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6. Insurance ...... 57 6.1. Market characteristics ...... 57 6.2. Regulatory oversight ...... 58 6.3. Takaful ...... 58 7. Islamic Banking and Finance ...... 59 7.1. Political background ...... 59 7.2. The law pros