In a developing economy like Libya, access to funds and credit is essential for business, economic development, and growth. A functioning credit system is fundamental in commercial banking, which is currently lacking in Libya.
Commercial banks rely primarily on deposits and investments by offering loans to individuals and institutions. They provide various financial products, including loans and credit lines, specifically tailored for small to medium enterprises (SMEs). These businesses utilize the funds to expand their operations, invest in equipment and machinery, and create jobs, thereby driving economic activity.
Libya is an oil-rich country, but its economy needs a comprehensive overhaul and reform. The country’s infrastructure is outdated and in disrepair, and its institutions are weak. Among the population aged 18 to 35, unemployment exceeds 25%.
The repeal of Law No. 1 of 2013, which aimed to prevent usurious transactions, could mark the beginning of essential reforms in Libya’s banking system. Allowing both Islamic banking and traditional interest-based banks to operate is crucial for establishing a new financial framework. This approach could lead to a more efficient credit system, fostering a stronger connection between commercial banking and the private sector.
To achieve these goals, key government institutions, private sector business leaders, and the banking industry, along with support from international organizations, should engage in extensive roundtable discussions to address these issues and offer implementable solutions.
Enhancing the relationship between the banking system and the private sector could help resolve many of Libya’s economic and social challenges, leading to sustainable political stability.
