Credit Access in Syria a Problem on the Periphery


SEATTLE — The early portion of 2011 marked the beginning of a time period commonly referred to as the “Arab Spring” by Western societies. In a general sense, this time can be characterized as the beginning of a significant decline in the political and social stability of several Middle Eastern countries, and its consequences have arguably extended far beyond what anyone could have predicted at the time.

The Arab Spring is a reference to anti-government, pro-democratic protests that took place throughout the Middle East, from Tunisia to Saudi Arabia. Nowhere, however, has seen worse long-lasting effects from this than Syria, a country that has been engulfed in a bloody civil war since then. While this conflict has produced a plethora of travesties, one problem significantly exacerbated by it is the increasingly severe lack of credit access in Syria.

The World Bank defines credit access as the provision of a loan from financial institutions (private and public) to entities such as businesses, local governments or private citizens. For inhabitants of developed countries, the notion of lacking adequate access to credit can be difficult to grasp, but if it became reality, it would render most individuals in those countries unable to use the basic functions of credit cards, acquiring a loan to purchase a vehicle or taking out a mortgage to purchase a home.

Causes of Poor Credit Acces in Syria

The overarching problem of credit access in Syria is multifaceted and would require a diligently planned, likely internationally sanctioned and comprehensive approach to solve, but can be summarized as the decimation of several key components of any well-functioning economy.

As of 2017, Syria had an estimated 50 percent unemployment rate, a 25.5 percent inflation rate, public debt accounting for 58.4 percent of the GDP, a budget deficit of 8.7 percent of the GDP and in 2014, approximately 82.5 percent of the population were estimated to be living below the poverty line. All of these factors have tremendous impacts on credit access and availability.

Another factor inhibiting efficient credit access in Syria is its disproportionately low stock of domestic credit. According to the CIA World Factbook, a country’s stock of domestic credit comes from a percentage of its GDP and can be understood as the total amount of credit that available to them in the form of that country’s currency. In essence, it is the total amount of credit that is available to banks to make loans with.

As of December 2017, Syria’s stock of domestic credit was estimated to be $6.816 billion, making it among the lowest in the world. In comparison, China’s stock of domestic credit was estimated to be $23.02 trillion in 2016, while the U.S. had a stock of $20.24 trillion.

The most likely reason for this is because, similar to many other developing countries, Syria lacks an effective taxation system, with only 4.2 percent of government revenue coming from taxes. As of 2017, Syria was ranked 218 out of 220 countries in taxation as a portion of GDP, above only Nigeria and Somalia. According to a report by The Guardian, the percentage of the GDP that is derived from taxes in most developing countries falls between 10 to 15 percent, while in developed countries this rises to an average of 35 percent.

Lending Rates Inhibit Credit Access in Syria

Aside from the ongoing civil war, one other major obstacle facing the development of quality credit access in Syria is the fact that it has the fifth highest commercial bank prime lending rate in the world, at 33.3 percent. The only countries ranking above them are the Democratic Republic of the Congo, Malawi, Brazil and Madagascar.

The commercial bank prime lending rate is defined as the average annual interest rates charged by commercial banks within the country, yet it is important to note that this rate is applicable only to those who are deemed the most worthy of receiving credit and have the financial assets to prove that. As one can imagine, there are very few people in the country currently capable of handling such a high interest rate. Comparatively, the commercial bank prime lending rates in the U.S. and Canada are 4.3 percent and 2.9 percent respectively.

Signs of Progress

Though looking at why certain factors have led to credit access in Syria being ranked in the 18th percentile of countries across the world can seem like a grim task, there does appear to be some gradual improvement that lends reason for optimism. For example, from December 2016 to December 2017, Syria’s stock of narrow money increased by $1.3 billion and its stock of broad money by $1.17 billion. During this time. the inflation rate also fell from 43.9 percent to 25.5 percent and the central bank discount rate fell from 5 percent to .75 percent.

Though it may not often be taken into consideration by someone it does not directly affect, if the inability to access credit became reality in developed countries, it is likely that the continued functioning of society as it is currently would cease to exist. Though such a claim could be perceived as overreaching or exaggerated, it is important to remember that as of 2017, the total amount debt that was offered in the form of credit for just mortgages on property in the U.S. reached $9.9 trillion, reflecting the degree of reliance developed countries have on credit accessibility.

Having considered that, without the ability to lend and borrow money, the ways in which individuals in developed nations live their lives would be fundamentally altered. Not only would it affect individuals and businesses, it would also affect the economy as a whole in a way far more damaging: inhibiting or destroying the possibility of private sector growth, and Syria serves as one of the most demonstrative case studies for this idea.

– Hunter McFerrin

Photo: Flickr


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