VZCZCXRO8589
RR RUEHROV
DE RUEHAM #4862/01 3450953
ZNR UUUUU ZZH
R 110953Z DEC 07
FM AMEMBASSY AMMAN
TO RUEHC/SECSTATE WASHDC 1178
INFO RUEHXK/ARAB ISRAELI COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 AMMAN 004862 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/ELA AND EEB 
TREASURY FOR SETH BLEIWEIS 
STATE PLEASE PASS TO OPIC 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV JO
SUBJECT: PERSONAL FINANCE IN JORDAN: SAVING LESS, BORROWING MORE 
 
REFS:  A) AMMAN 4774 
 
        B) AMMAN 4575 
   C) AMMAN 4559 
   D) AMMAN 4207 
   E) AMMAN 3770 
 
¶1. (U) Summary:  On average, Jordanian households spend $1900 more 
than they earn annually, and pay for the gap with loans, real estate 
sales, and remittances.  Consumer use of banks is high, more as a 
vehicle for debit and credit cards than for savings.  Mortgages 
continue to grow in popularity as real estate remains the investment 
of choice in Jordan. End Summary. 
 
Household Spending Greater than Household Income 
--------------------------------------------- --- 
 
¶2. (U) According to Jordan's Department of Statistics (DOS), out of 
a population of 5.7 million people, Jordan has approximately one 
million family households with an average 5.7 members.  A recent DOS 
survey of expenditure and income revealed that average household 
income increased 11% from $7,800 annually in 2002 to $8,700 in 2006. 
 During the same period, household expenditures increased 21 percent 
from $8,700 to $10,600 annually.  Talal Touqan, Head of Research and 
Financial Analysis at Ahli Investment Banking, agreed that Jordanian 
consumption is growing, particularly as Jordanians' exposure to 
international products grows. 
 
¶3. (U) The DOS survey also found that food accounted for the largest 
expense, equaling 37% of total expenditures.  Recent increases in 
food prices have created tensions in Jordan and were a key issue in 
recent elections (Ref C).  The remaining categories were 
transportation and telecommunications 16%; housing 16%; education 
7%; fuel and utilities 6%; health 3%; furniture 2% and entertainment 
2%.  The report also found that between 2002 and 2006, there were 
large increases in household ownership of mobile phones (from 38 to 
84 percent) (Ref E); satellite television (from 37 to 84 percent); 
and computers (from 15 to 32 percent). 
 
Little Savings, but Great Bank Use 
---------------------------------- 
 
¶4. (U) DoS Director General Ghazi Shbaikat said there are no savings 
- even for retirement - as far as most Jordanian households are 
concerned, due to the high cost of living.  Sahel Annabi, founder of 
a personal financial advisory firm and publisher of Jordan's first 
personal finance magazine, told Econoff that while the 
multi-generational structure of Jordanian families can ease 
finances, budgeting and planning skills are typically weak and these 
responsibilities are traditionally left to the father. 
 
¶5. (U) Jordanians are generally financing consumption through bank 
loans, the sale of real estate, and remittances, estimated at $2.54 
billion in 2006 (Ref D), or approximately $2,540 per household. 
This has led to a high use of consumer banks in Jordan, even in 
rural communities, within the last seven years.  Kholoud Saqqaf, 
Acting Executive Manager of the Banking Supervision Department at 
the Central Bank of Jordan (CBJ), confirmed that there are currently 
24 licensed banks in Jordan, all of which provide retail banking 
services.  Standard & Poor's and Moody's, in their country ratings, 
have indicated that Jordan has too many small banks.  Indeed, the 
top three banks in Jordan have a market share of just over 40 
percent, and CBJ is trying to encourage greater consolidation by 
increasing the amount of capital held by a bank to JD 40 million and 
implementing programs to raise banking standards and governance. 
 
¶6. (SBU) Saqqaf said that the CBJ and Jordanian banks are very 
conservative relative to other countries.  Complex financial 
products such as hedge funds are not available in Jordan.  At the 
average consumer level, this conservatism extends to paying 
attention to bounced checks, which are tracked through an IT system 
and shared with all banks.  Customers who bounce three checks are 
not issued any additional checks, and those who bounce ten checks 
are not eligible for loans. 
 
Loans 
----- 
 
¶7. (U) Touqan said that most bank loans are for commercial purposes. 
 Consumer loans are most often five-year loans for cars at 14-15 
percent interest.  Jordanians also tend to take out personal loans, 
typically for 3-4 years at 10 percent interest, which are used to 
finance weddings, investments, and seasonal heating fuel expenses. 
Touqan also noted that a number of foreign banks in Jordan have 
begun offering student loans. 
 
¶8. (SBU) Saqqaf said that Jordan has 20 additional licensed lending 
 
AMMAN 00004862  002 OF 002 
 
 
institutions which are not banks and are most active in car loans 
and leasing.  They can make real estate loans, but not for any real 
estate that is held more than two years.  Annabi is nervous about 
the growth of borrowing and said that most Jordanians need to pay 
more attention to "debt management" than to wealth management. 
 
Debit and Credit Cards 
---------------------- 
 
¶9. (U) An October 2007 report by Oxford Business Group estimated 
that there are 2.9 million credit cards in circulation in Jordan. 
Hani Al-Qadi, General Manager, Arab Jordan Investment Bank and Visa 
Inc., said that credit cards were first introduced to Jordan for 
businesses serving foreign tourists.  As the credit card business 
has matured, its use has extended to Jordanians who are now using 
credit cards for a growing percentage of their purchases. 
 
¶10.  (SBU) First marketed in Jordan as debit or ATM cards, Visa now 
has a 90 percent market share with 15,000 merchants accepting Visa 
credit cards, said Qadi.  Sameer Jabari, CEO of a banking software 
firm, cautioned however, that those figures dramatically overstated 
Visa's market share since most of Visa's cards are still used only 
as an ATM card, and that the majority of the 300,000 MasterCard 
cards were used as a credit card.  Qadi said that Visa's goal in 
Jordan is now more credit purchases per card and not greater card 
penetration.  He said Visa recognizes that North America is a 
saturated credit market and that its growth will come from 
developing economies.  Samer Sunnuqrot, Deputy Chief Executive 
Officer of Ahli Bank, agreed that credit cards represented the 
biggest growth opportunity in retail banking in Jordan. 
 
Development of Mortgages and Real Estate Sector 
--------------------------------------------- -- 
 
¶11.  (SBU) Financial experts in Jordan agree that real estate is a 
more common investment than stocks, bonds or other financial tools, 
in part due to the ease of getting a real estate loan.  Mortgages 
have become more common in Jordan over the past seven years, 
including the addition of long-term loans for 20 years covering 
70-80 percent of the purchase price.  Interest rates today are fixed 
between 6-8 percent, and adjustable mortgages are available.  Touqan 
mentioned some banks have been offering mortgages with a smaller 
down payment, but that problems in the American mortgage market are 
making Jordanian bankers more cautious.  After Jordan's stock market 
fell 33 percent in 2006, many middle-class Jordanians who typically 
traded stocks transferred their money to real estate which is 
perceived as less risky. 
 
¶12. (SBU) Sunnuqrot speculated that Jordanian home ownership is now 
about 60 percent, with more than half mortgaged.  Nashat Masri, the 
founder of a private equity investment firm in Amman, and many other 
Post contacts believe that Jordan is currently experiencing a 
housing bubble.  Management consultant Sameer Jaber said apartments 
in affluent areas that cost USD 112,000 seven years ago now cost USD 
350,000.  Increases in both commercial and residential real estate 
have been attributed to petrodollars entering Amman and the influx 
of Iraqis (Ref A).  Should the bubble burst and prices fall, Masri 
said that many Jordanians will still have made a lot of money, 
because they purchased the houses at a low cost. 
 
¶13.  (U) Saqqaf also noted that the CBJ has placed limits on banks 
by allowing only 20 percent of deposits to be used for real estate 
activities.  She estimated that nationwide, 11-12 percent of 
deposits are used for real estate loans.  Masri, who also serves on 
the board of directors of a bank, agreed that there have not been 
many loan defaults because the banks have been very conservative in 
granting mortgages.  Saqqaf and Sahel predicted that as inflation 
increases, which it is expected to do in 2008 (Ref B), the mortgage 
default rate will go up.  Sunnuqrot added that the launch of Darkom, 
Jordan first housing loan insurance company, in the summer of 2007 
and the seven-year old Jordan Mortgage Refinance Institution have 
both lessened the risk to banks.  Sunnuqrot said that demand for 
housing in Jordan will stay high until at least 2010, when the end 
of a rent control program will likely end and cause dramatic 
increases in rent prices. 
 
Visit Amman's Classified Website at 
http://www.state.sgov.gov/p/nea/amman 
 
HALE