In the debate that is currently raging in Lebanon about the viability of the banking system and whether it will ever regain the public’s confidence, there is one essential ingredient that is missing: bank credit to the private sector. And it has been missing or forgotten because it is the one thing that banks have stopped doing completely since October 2019: in other words, ‘out of sight, out of mind’. The irony, of course, is that banks’ raison d’être is financial intermediation, or to intermediate between savers and investors, or more generally between the providers of funds and the users of funds, and that means primarily the extension of credit to the private sector. And the fact that this essential function has been absent for the past four and a half years proved disastrous to the economy, let alone banks, as this short spotlight will amply show.
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Credit to the Private Sector The Unsung and Forgotten Hero in the Banking