International Law

Hiba Husseini on Secured Transactions Regimes in Emerging Arab Market Economies

 by Hiba Husseini

Access to credit is one limitation on growth in Arab economies. Secured transactions laws leave borrowers unable to leverage while lenders struggle to manage uncertainty created by outdated laws. Reform can reduce lender risk and increase credit. With an open regime eliminating barriers, setting clear priority rules, maintaining public registries and enforcing security agreements, Arab economies can access to credit in their own economies.


Constrained access to credit remains one of the top limitations on economic growth in emerging Arab market economies. Outdated and traditional secured transactions regimes leave loan seekers unable to leverage valuable firm assets while lenders struggle to manage uncertainty often created by laws that have not kept up with modern business practices. Secured transactions reform, however, can reduce lender risk and, as has been shown, lead to increased availability of credit. By designing a transparent secured transactions regime that eliminates barriers to lending, sets out clear rules of priority, maintains a centralized and public collateral registry, and facilitates the effective enforcement of security agreements, emerging Arab market economies can expand access to credit in their own economies.

II. Constrained Access to Finance in Emerging Arab Market Economies Remains Among the Top Limitations on Private Sector Growth

Open access to finance is crucial for economic growth and private sector development. In developing economies, limited access to credit remains one of the greatest barriers to economic growth and development. Credit finances production and capital formation. Without it, the small and medium-sized businesses that play an "essential role in building a competitive private sector and contribute significantly to employment and economic activity" face substantial barriers to growth. This places a substantial damper on growth in these economies.

Though a lack of adequate access to credit is a burden on all developing economies, emerging Arab economies face an especially great obstacle. Globally, more than half of private firms in emerging markets lack access to credit. Roughly 43 per cent of firms in Eastern Europe and Central Asia, 45 per cent in Latin America and the Caribbean, 55 per cent in South Asia, and 63 per cent in Sub-Saharan Africa lack access to credit. In emerging Arab economies in the Middle East and Northern Africa (MENA), however, roughly 75 per cent of firms lack access to credit.

Survey numbers further support the existence of a noticeable gap between access to credit in MENA and access in other emerging regions. In stark contrast to the worldwide average of over 35 per cent, only 5.9 per cent of private firms in MENA report maintaining a line of credit with a bank. While only 3.5 per cent of MENA firms report currently having a loan from a bank, the worldwide average sits at 26 per cent. With MENA firms reporting that roughly 85 per cent of investments are financed internally, the highest rate recorded in the World Bank surveys, it is not surprising over 40 per cent of MENA firms reported that obtaining credit continues to be a major constraint on their business. [footnotes omitted]

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Hiba Husseini received her doctorate of law (J.D) .from Georgetown University (1992) and her masters in corporate finance (M.S.) from the University of the Sorbonne (2003). She is a member of the Pennsylvania State Bar, USA (1993) and the Palestinian Bar (1997), and has over 20 years' experience in corporate law and finance as managing partner of one of Palestine's most prominent law firms (Husseini and Husseini) where she specializes in commercial transactions, mergers and acquisitions, securities offerings, contracts and agreements (other areas include intellectual property, banking, labor and employment, investment and taxation, creditors' rights and bankruptcy, corporate governance, monitoring legislation, and local government and municipal authorizations/licenses). Ms. Husseini represents a variety of domestic companies, financial institutions, entrepreneurs and investors in their business activities and investments. She also works closely with Palestinian institutions on trade and customs matters and has provided advisory services to clients on procedures related to customs and duties imposed in Palestine. She has been working extensively with the Ministry of National Economy on the legal framework in its preparation for accession to the WTO. Ms. Husseini is a founder and board member of Al-Quds Holding Ltd, and the chairman and founding member of Al-Mustakbal Foundation. She serves on the boards of various educational, professional, cultural, business, and non-profit organizations. She lectures in Palestine and abroad and participates in a large number of local and international conferences. She is fluent in both Arabic and English.