The state owned and controlled Jumhouria Bank, Libya’s largest bank, announced Tuesday that it will close its doors from Sunday 2 October until Thursday 6 October.
The bank said it is modernising its banking system.
The Bank reassured all parties, institutions, and individuals that there has been no change or modification to their bank account numbers, and that their transactions will take place normally upon resumption of work – next Sunday 9 October.
Only in Libya?
This is not the first Libyan bank to do so. In June, the state National Commercial Bank (NCB) also closed for a month to update its computer system.
Criticism of the bank
The bank has inevitably come in for harsh criticism on social media. On its Facebook page it has disabled comments. However, elsewhere customers have been asking why is the update not conducted overnight or over a long weekend? Why does it need a week? How are they expected to run their life without access to their accounts?
This lack of sensitivity to customers’ needs reflects the banks’ legacy. They are state-owned banks from the 42-year Qaddafi era. They deal mostly with state-sector employees. The state banks act as safety deposit boxes and conduits for state employees to receive their salaries.
Added value and new banking products?
They see no added-value in these customers who overwhelmingly withdraw all their salaries as soon as they are deposited – subject to the state banks having liquidity. State employees cause huge crowds in state banks, overwhelming their banks.
The legacy Qaddafi era state banks have little interest in improving their services or introducing new products. It is very difficult for customers to transfer bank accounts elsewhere. They are, to a degree trapped and their state banks know this.
Overall, state banks are not interested in lending to customers as Libyan law does not offer good protection for the banks to recover their loans. Hence the state banks have no incentive to be innovative and create new products or provide more loans.
Similarly, management at state banks are not incentivised. They do not receive or lose bonuses for better services, more loans or more profit for the bank.
Whilst most banks in Libya have introduced some Islamic banking products selling cars, furniture, computers etc, it has taken banks a long time to understand and market Islamic banking products.
The private sector is the most dynamic
Today in Libya, by far, the most dynamic banks are the small private sector banks such as Aman Bank, Bank of Commerce and Development, ATIB etc. They are still small in size, with assets in the hundreds rather than billions of Libyan dinars. However, they offer better quality and personalised service to customers – because they need and value their customers. They know, especially business customers, have a choice and can bank elsewhere. They enjoy a different dynamic with their customers than the state banks.
When will they be privatised?
The poor quality of service provided by Libya’s state banks inevitably leads to the question: When are they going to be privatised?