Reliance on banking apps and e-wallets has surged in recent weeks in Gaza, despite the strip’s lack of the infrastructure needed to support such a shift.
While vendors see digital transfers as a solution to Gaza’s cash shortage crisis, unreliable internet service, prolonged power outages and recurring technical problems with banking apps and e-wallets frequently prevent transactions from going through, according to residents and vendors who spoke to Mada Masr.
A Palestinian economist told Mada Masr that the crisis created by the unreliability of electronic transactions is the result of a deliberate Israeli policy aimed at engineering a distorted economic reality in Gaza.
Gaza began moving to a cashless economy at the end of last year. After Israeli authorities stopped accepting cash payments from Gaza’s merchants, vendors followed suit. Gaza already faced a lack of small denominations and a shortage of cash — much of the currency in circulation has deteriorated, and no new banknotes have entered the strip since the beginning of the war and the tightening of the Israeli siege. But once Israel changed its payment method, many vendors now exclusively accept digital transactions.
Before the war, Gaza was served by around 11 banks, six Palestinian and five foreign. Only their mobile apps remained accessible after all 56 bank branches shut down during the war. Nearly 91 ATMs also fell out of service after being partially or completely destroyed, deepening the liquidity crisis, according to the Palestine Monetary Authority. The authority had said it was unable to reopen bank branches because of the continuous strikes and perilous security conditions. A few branches resumed partial operations following the October ceasefire.
“We’ve forgotten what paper money feels like, I swear,” said Youssef Moussa, a Palestinian who was displaced to western Gaza City and supports a family of seven.
Moussa learned to use a banking app during the war as cash became scarce, relying on it to buy food and water for his family. What he described as “the worst idea” has become unavoidable for him, like everyone else in Gaza.
“Money doesn’t have any value inside the app,” he said, referring to the hefty commissions charged to convert digital balances into cash. The war has created a cash market , where those with physical currency charge a fee to cash out digital transfers — commissions that have at times exceeded 50 percent of the amount withdrawn.
The economic devastation wrought by the war has only deepened people’s sense that they are “restricted in everything, even in the ability to buy the simplest necessities,” Moussa said.
“Sometimes I’ll go to buy potatoes, vegetables and other food. After I’ve finished shopping, the wallet stops working, or the internet cuts out. And that’s it. I have to leave, and lunch for the day is delayed or gone,” he said, describing the new obstacles to securing basic necessities under the siege as technical failures that can suddenly derail digital payments that people are now forced to rely on.
Ahmed Abu Qamar, an economist living in Gaza, told Mada Masr that Israel has been using its control over the entry of goods into the strip to manipulate the banking sector. The Occupation authorities have restricted imports to a select group of approved traders, starting with five, then expanding the list to 10, and now to 13, according to Abu Qamar.
At first, these traders collected cash from smaller traders inside Gaza in exchange for bringing goods into the strip. But that money did not circulate in the markets because it was paid to the Israeli side, which mandated cash payments to allow goods to enter, according to Abu Qamar and a trader who previously spoke to Mada Masr. Around the close of last year, however, Israel began requiring the 13 approved traders to pay digitally for imported goods. They, in turn, imposed the same payment method on smaller traders, who ultimately passed the requirement on to the people of Gaza.
Two vendors in Gaza told Mada Masr they had no choice but to request e-payments from customers after larger traders demanded they pay digitally. Otherwise, they said, they would struggle to carry out their own transactions.
The shift has been compounded by the poor condition of paper currency and the “change crisis,” as the severe shortage of smaller denominations has come to be known. One of the traders said they still accept cash but only if the banknotes are completely intact.
The 13 traders are the ones bringing goods into Gaza, and thus, Abu Qamar said, they are the ones deciding which type of payment they will accept. “If they say, for instance, ‘Today, we don’t want to accept worn or damaged banknotes,’ the entire market will stop accepting these. If they say, ‘We won’t take the 10-shekel notes,’ again the entire market will not accept them. Then maybe a couple of days later, they say, ‘We accept worn 20-shekel notes but at a lesser value,’ exchanging every 20 shekels for 15, for example — we will find the whole market moving in the same direction,” Abu Qamar explained.
With the absence of any meaningful role by banks or the Palestine Monetary Authority, the traders selected by Israel have come to fully control Gaza’s banking sector, Abu Qamar said, arguing that they have exploited their position to extort residents and reap unjustified profits.
While these changes address key problems, they also introduced new ones, Mohamed Baraka, an employee whose salary is deposited through a bank and who relies on digital transfers for his daily purchases, told Mada Masr.
For Baraka, digital payments have curbed the influence of “currency traders,” who had exploited the severe shortage of cash by hoarding banknotes and charging steep commissions. But the shift has also created new obstacles for anyone trying to spend physical cash.
At any moment, he said, he could lose the ability to buy basic necessities for his family if Israel once again disrupts telecommunications and internet services, as it has done on previous occasions.
Mamdouh Salem, whose money is held in cash, said the growing reliance on e-payments has made it difficult to use his money. Even banknotes he has that are in good condition are rejected by vendors, many of whom no longer accept cash at all. And there, he said, “you have to make sure your phone is fully charged and that you have an internet connection to complete transactions.”
The refusal by vendors and traders to accept several denominations of the Israeli shekel — the main currency used in Gaza — has forced Um Attiya to make choices that are unfair to her and her family. Her husband is paid in cash, forcing the family, time and again, to grapple with the problems of trying to pay with worn banknotes whenever they shop. Either vendors refuse to accept the money altogether, or, if they do, she forfeits her change because of the lack of small denominations.
Abu Qamar pointed to another reason residents and vendors have lost confidence in paper currency, even when it is undamaged: the silence of the Palestine Monetary Authority. He said the authority has failed to encourage banks operating in Gaza to reassure the public that worn banknotes will remain valid and can be exchanged after the war ends or if Israel permits it. According to Abu Qamar, this is the result of Israeli pressure that has barred the authority and Palestinian banks from intervening to counter Israeli policies in the strip.
From the first day of the war, the Palestine Monetary Authority received an Israeli directive not to intervene in the crisis, Abu Qamar said.
He also held the Palestinian Authority largely responsible for the problem, arguing that it has failed to pressure Israel through international partners. It has also agreed to what Abu Qamar described as a “symbolic return” of banking operations in Gaza, allowing some branches to reopen without allowing deposit and withdrawal services.
Abu Qamar said that Israel’s financial policies toward Gaza violate the 1994 Paris Protocol on Economic Relations, which Israel assented to and was designed to allow the Palestinian Authority to manage its economic affairs while maintaining close ties to the Israeli economy. The agreement, he noted, obliges Israel to ensure sufficient quantities of currency enter the Palestinian territories and to facilitate the removal of surplus cash.
Abu Qamar said a partial solution to the crisis would require the Palestine Monetary Authority and Palestinian banks to reclaim their role in Gaza’s financial system rather than leaving it to traders. Banks, he argued, should resume accepting deposits and allowing withdrawals, while the monetary authority should press Israel to comply with the Paris protocol.
Israel’s reneging on this agreement, Abu Qamar said, has become a form of punishment that drains residents’ pockets.
With many people short of cash and many goods entering Gaza through humanitarian aid, Palestinians have increasingly turned to other means of getting by, Abu Qamar said. Barter has emerged, alongside the sale of belongings, as part of what he described as an economy of necessity. “Someone might exchange a cooking pot for some food or trade a bucket of water for something else.”
The post Cashless economy forced on Gaza to detriment of Palestinians first appeared on Mada Masr .
Cashless economy forced on Gaza to detriment of Palestinians
Aggregated summary from an independent source. Read the original at MadaMasr.