Checks Values’ Cash Conversion Depends on Lebanese Pound Fluctuations

According to the data published by the Association of Lebanese Banks’ (ABL), the total number of cleared checks in the Lebanese financial system slumped from 4,490,413 checks by September 2020 to 2,555,352 checks by September 2021. Moreover, the value of total cleared checks declined yearly by 29.58% to reach $28.63B by September 2021.

In details, the value of checks in LBP dropped by 4.69% year-on-year (YOY) to reach $13,778M, while value of checks in foreign currencies decreased by 43.31% YOY to reach $14,860M by August 2021.

The volumes of cleared checks denominated in Lebanese Pounds and foreign currencies witnessed significant yearly drops of 45.84% and 40.49% to settle at 1,206,224 and 1,346,928 checks, respectively by September 2021.

Accordingly, the dollarization of cleared checks in terms of value went down from last year’s 64.45% to 51.89% by September 2021. In contrast, the dollarization rate of checks in terms of volume rose from last year’s 50.40% to 52.71% by September 2021.

Notably, the number of returned checks fell by a substantial 78.53% YOY to 20,709 checks while the value of the returned checks retreated by 46.75% YOY over the same period to reach $408M by September 2021. Noting that banker checks are more often used to conduct check payment transactions, therefore number of returned checks have considerably declined.

Moreover, discounted checks are traded today according to the fluctuation of the Lebanese pound. In fact, this mechanism is leading to one conclusion: total numbers of checks which has significantly decreased way more than the drop in total value of checks implies that the average value of one issued check has increased from $9,056 on September 2020 to $11,207.06 on September 2021. This reflects that once the exchange rate deteriorates, checks are cashed out at a lower discount rate which pushes banks’ account holders to withdraw bigger amounts in order to cash out same amounts of dollars in cash.

Value of Cleared Checks by Currency, by September (in $B)

Checks Values’ Cash Conversion Depends on Lebanese Pound Fluctuations

Source: ABL, BLOMINVEST

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