Fiscal reforms and new programmes driving Jordan's progress

Regulatory reforms aimed at implementing international best practices across banks, capital markets and the insurance industry have been undertaken in Jordan’s financial services sector, which already benefits from stable, well-capitalised and profitable lenders, and rapid growth and diversification in Islamic financial services.

Yet, there remains room for improvement. The majority of the population is still unbanked and overall financial inclusion is low. Meanwhile, many businesses have difficulty accessing credit, despite growing concerns over excess liquidity, although rising government and donor investment in new lending programmes could see financing to small and medium-sized enterprises (SMEs) improve considerably in 2018.

The insurance sector is also experiencing growth challenges. Motor third-party liability (MTPL) tariffs have been capped by the government, and the market is crowded, leading to issues with underwriting and deteriorating profit margins. Moves to shift regulatory responsibilities for the sector to the Central Bank of Jordan (CBJ) have also been delayed.

In capital markets, performance on the Amman Stock Exchange (ASE) has slipped in recent years, with limited liquidity, declining trade values and volumes, and regional volatility weighing on development. This situation is set to change, however, with authorities recording steady progress in the exchange’s long-awaited privatisation, as part of an expansive reform programme aimed at seeing the country upgraded once again to “emerging market” status.


Amman’s status in regional banking dates back to the formation of the modern state of Jordan in 1948, when Arab Bank moved its headquarters from Jerusalem to the Jordanian capital, Amman.

Over the intervening 60 years the domestic banking industry developed rapidly, kick-started by a tripling of the population between 1948 and 1950 as displaced groups from the troubled region arrived in Jordan. The new arrivals brought with them their savings and an entrepreneurial spirit, and banks such as the Egyptian Arab Land Bank and Jordan Ahli Bank entered the market to claim a share of the increasing amount of activity.

During the 1950s and 1960s, a booming construction sector helped to drive Jordan’s GDP growth to a constant level of between 8% and 9%, a trend which attracted significant players such as Bank of Jordan and Standard Chartered Bank. In 1964 the CBJ was established to oversee the financial services sector.

Regional conflict in 1967 and a civil war during 1970 and 1971 resulted in a pause in economic expansion, but by the mid-1970s the nation was experiencing the strongest growth rates in its history, reaching a peak of 24% in 1976, according to the World Bank. The 1980s brought new challenges to the sector, as Jordanian workers flooded back from the Gulf at the end of the region’s oil boom, and the high-profile collapse of Petra Bank in 1989 undermined confidence in the entire financial industry. A period of austerity and fiscal restructuring followed, and a second wave of economic reforms carried out in the 1990s succeeded in setting the economy on a path to steady growth.

Brancing Out

Since 2000 the industry has steadily expanded: in 2003, 20 banks were licensed by the CBJ, operating 443 branches between them. By 2017 there were 25 licensed banks operating in Jordan, 16 local and nine foreign. Four – three Jordanian and one foreign – are licensed Islamic banks. The total number of bank branches in the kingdom rose from 714 in 2012 to 805 in 2016. However, bank expansions have not kept pace with population growth, and the number of people per branch rose from 8900 in 2012 to 12,200 in 2016.

Commercial banks had the largest share of capital in the sector, at JD2.5bn ($3.5bn) in 2016, up 3.3% on 2015. Islamic and foreign bank capital was stable, at JD400m ($564.3m) in 2015 and JD411.4m ($580.4m) in 2016, according to the Association of Banks in Jordan (ABJ).

The largest bank by number of branches is the Housing Bank for Trade and Finance (HBTF) with 117 locations. Established in 1973 as a public shareholding, the HBTF’s total assets stood at JD7.8bn ($11bn) in 2016, or 18.2% of domestic banking assets. BLOM Bank and Bank Audi have the largest foreign branch networks with 14 each, while Jordan Islamic Bank (JIB) leads the sharia-compliant segment with 74 branches.

Arab Bank, which was established in 1930, is the largest private conventional bank, holding a 19.3% share of total banking assets, 19.7% of deposits, and 13.8% of direct credit facilities in 2016, according to the company’s most recent annual report. Arab Bank Group’s global presence spans 15 countries including China, Egypt, the UAE, the US and Singapore.

Economic Impact

The financial services sector is the second-largest in the Jordanian economy, accounting for JD1.3bn ($1.8bn) of economic production in the first quarter of 2017, equivalent to 19.9% of GDP at current prices. Only government services generate a larger share, accounting for JD1.4bn ($2bn) over the same period. The banking effective tax rate fell from 32.5% in 2015 to 30.5% in 2016, with JD228.9m ($322.9m) of taxes paid in 2016, against JD280m ($395m) in 2015 (see Economy chapter). Despite this dip, banks remain an important source of government revenue, and the ABJ reports that the sector generated JD261.3m ($368.3m) of income tax revenues in 2016. There are 15 banks listed on the ASE, with financial services accounting for 51.6% of trading by value in 2016 and 53.2% in 2017. In the former year, banks comprised 82.5% of the financial sector index, with the banking index rising by 3% , supporting 0.9% financial index growth. This compared favourably with a 0.4% increase, 7.2% contraction and 11.2% decrease in the insurance, diversified financial services and real estate indices, respectively.


Jordanian banks are well capitalised with sound liquidity. The system’s capital-to-assets ratio was 12.7% at the end of 2015, a strong showing against regional peers, and offering a buffer against shocks or unexpected losses. Jordan’s banks are almost exclusively funded by customer deposits, with wholesale funding very limited. The CBJ imposes an additional capital charge for institutions that it deems systemically important, to further reduce system-wide risks.

Bank liquid assets are equivalent to 42% of overall holdings, and the sector’s total foreign assets have recovered from a low of JD4.7bn ($6.6bn) in 2014 to reach JD5.4bn ($7.6bn) in 2016, according to the CBJ. Total domestic assets have increased steadily from JD32.9bn ($46.4bn) in 2012 to JD42.9bn ($60.5bn) in 2016, while private sector deposits from resident companies and individuals rose from JD20.4bn ($28.8bn) to JD27bn ($38.1) over the same period.

Capital adequacy ratios ranged between 18.4% and 19.1% between 2012 and 2016, while the banking sector’s ratio of non-performing loans (NPLs) has shown considerable improvement, dropping from 7.7% in 2012 to a five-year low of 4.4% in 2016.

Although liquidity ratios fell from a high of 152.2% in 2014 to a five-year low of 138.1% in 2016, the sector remains profitable, with net profits after taxes rising from JD414m ($584m) in 2012 to JD521.4m ($735.5m) in 2016. Credit growth fell from 12.5% in 2012 to 5.2% in 2014, before recovering to 9.6% in 2015 and 8.7% in 2016. Deposit growth contracted in 2016, however, having fallen steadily from 10.5% in 2013 to 0.9% in 2016.


In January 2017 the ratings agency Moody’s projected bank profitability would remain “stable” over the year as a result of improving margins, with the sector’s sound capital and liquidity levels continuing to provide a buffer to downside risks. The sector’s greatest strengths – its size and cross-border operations – also raise the risk of systemic and contagion effects in the event of shocks. “The decrease in the banking sector in 2016 was caused by high competition in the retail segment, while corporate banking has been heavily affected by the regional turmoil,” Adnan Shaher Al’Araj, general manager of BLOM Bank, told OBG.

Asset risks for local banks are elevated as a result of credit concentration, which includes high levels of exposure to the government and household debt. However, interest rate increases are forecast to dampen credit demand going forward, especially for household credit. The CBJ has hiked key interest rates four times since December 2016 by a cumulative 1.25%. Moody’s expects domestic credit growth to be in the range of 6-7% in 2017, down from 8% in 2016.

Bank total consolidated assets, including loan portfolios, stood at 278% of GDP at the end of 2015. Moody’s forecasts that the sector’s return on assets would be 1.4-1.5% in 2017, with any rise in provisions for NPLs expected to be offset by improved net interest margins, supported by the CBJ’s rate hikes. The agency praised the country for implementing Basel III capital requirements in 2016, and for a planned amendment of the Deposit Insurance Corporation Law, which will bring it in line with international best practices, and create a more robust bank recovery and resolution framework.

Financial Inclusion

Credit concentration, low levels of financial inclusion and limited access to business credit remain some of the biggest obstacles to long-term growth. The kingdom is behind many of its regional peers in reducing its unbanked population. In an August 2017 report examining financial inclusion, private sector think-tank Jordan Strategy Forum (JSF) stated that the financial inclusion rate – meaning the proportion of citizens over 15 years old that have a bank account – stands at 24.6%. Financial inclusion for females was just 15.5%, compared to 33.3% for males. By comparison, in Bahrain the rate is 81.9%, Saudi Arabia is 69.4% and Turkey is 56.7%. The situation in Jordan is more comparable to Palestine and Egypt, which recorded rates of 24.2% and 13.2%, respectively.

Electronic Payments

In September 2016 the CBJ created six dedicated teams to monitor and follow the achievement of the main priorities set by the National Financial Inclusion Strategy 2018-20. These cover electronic payment systems, microfinance, SME financing, financial literacy, financial customer protection, and collection and analysis of data and performance indicators.

To enhance the offer of electronic and mobile payment solutions, the CBJ encouraged banks and start-ups to work together to develop services based on new technologies, with the aim of increasing financial inclusion. Mobile penetration stands at 149%, while 85% of the population was counted as actively using the internet in the first quarter of 2016, according to the Telecommunications Regulatory Agency. Cashless transactions through smartphones and mobile devices, e-payments, and online lending have therefore progressed, and the initial reluctance of clients is easing.

JoMoPay and eFawateer are examples of mobile and e-payment platforms created recently by local start-ups in collaboration with the CBJ to develop cashless bill payment and electronic inquiries. E-wallets and prepaid credit cards have also become popular among the unbanked population, presenting an opportunity to attract new clients to the banking system. As part of the financial inclusion strategy, the Cabinet approved an e-payment bylaw in October 2017, which aims to clarify regulations for e-payment systems licences, transactions and conflict procedures. “Jordan has established a sophisticated environment for enhancing financial inclusion, with successful e-payments programmes and a comprehensive regulatory framework,” Kamal Al Bakri, general manager at Cairo Amman Bank, told OBG.

Access to Credit

More inclusive access to financial services has had a positive impact on bank credit growth. On average, banks that lend more to individuals earn a higher return on assets and have a wider net interest margin, according to JSF data. However, access to credit remains one of the largest single constraints to investors and business expansion, with the kingdom placing 185th out of 190 economies surveyed in the getting credit indicator on the World Bank’s “Doing Business 2018” report, a ranking that has been unchanged since 2015 (see Economy chapter).

This is perplexing given the reduction of NPLs and rising concerns over excess liquidity. The January 2017 Capital Market Development Strategy and Roadmap for Jordan (CMDSR) found that in 2015, 12 local banks had a total of JD24bn ($33.9bn) in excess liquidity. The plan noted that even with government securities purchases taken into account, excess liquidity stood at 21.2% of total available lending funds, or JD13bn ($18.3bn).

Limited credit access for SMEs is especially problematic, with JSF reporting that the proportion of total lending at 13 major commercial banks in Jordan that went to SMEs was 9.3% between 2008 and 2015, compared to 19.2% for retail lending and 46.2% for corporate lending, even though 94% of businesses in Jordan are SMEs, according to the European Investment Bank (EIB).

SME Support

Recognising the challenges, the CBJ unveiled several policy interventions aimed at improving credit access as part of its financial inclusion strategy in the Jordan Economic Growth Plan 2018-22. The strategy emphasises enhanced credit options for SMEs, including microfinance services, financial literacy training and consumer protections. In September 2016 the bank also announced a subsidised 10-year, 1% interest rate for extended advances to targeted economic sectors, including industry, tourism, agriculture and IT. This rate is available to projects located outside of Amman, with an emphasis on SMEs. According to the World Bank, credit extended to SMEs via the CBJ’s financing programme rose by 29% in value terms in 2016, with 76% more projects benefitting from the scheme.

In March 2017 the CBJ announced plans to establish two new investment companies: the Trade Banks Company for Investment, with JD100m ($141.1m) in capital, and the Islamic Investment Company, with JD25m ($35.3m) in capital. Both will focus on financing medium-sized enterprises. The funds are part of an initiative involving all but one Jordanian commercial banks, all three Jordanian Islamic banks and three foreign banks, supported by the CBJ. The new firms have been incorporated and are set to begin operations imminently.

The CBJ also announced plans to establish an export credit programme operated by the Jordan Loan Guarantee Corporation, which would allow it to boost export credit and support SME efforts to access global markets. The programme will have a JD100m ($141.1m) allocation to be disbursed in two JD50m ($70.5m) instalments. It is supported and partially financed by the CBJ and a World Bank loan to the government.

The CBJ has secured $440m in funding from international and regional institutions, which has been injected into the local banking system to facilitate SME financing. This saw private sector credit grow by 10% in 2016, up from 4.6% in 2015, the bank reported.

Donor financing has also played an increasingly important role in expanding SME access, with major international lenders such as the European Bank for Reconstruction and Development (EBRD) and the World Bank recently rolling out SME lending programmes. In May 2017, for example, the EBRD announced plans to provide $10m to Jordan Ahli Bank for micro-, small and medium-sized enterprises. The facility will be used for underserved enterprises, and includes $1m in technical assistance for the lender’s efforts to facilitate international best practices and support lending to women.

“SMEs are the key for steady growth in the long term, which is why it is crucial that the CBJ, and both Islamic and conventional banks, keep on creating new tools and programmes to facilitate access to credit across sectors and governorates,” Iyad Asali, general manager at Islamic International Arab Bank, told OBG.

Expanding Credit

Islamic banks could offer important support for financing to the SME sector, as well as helping to finance large-scale infrastructure projects via Islamic bond issues (see analysis). JIB, which has a 60% market share, has been providing SME credit since 1994. In May 2015 the bank announced a partnership with the Jordan Loan Guarantee Corporation to offer SME loans backed by guarantees from the latter.

Nonetheless, Islamic SME financing in the country is currently limited and holds considerable potential for future progress, according to a 2015 report published by the Islamic Financial Services Board and the University of New Orleans. Of all MENA countries, Jordan and Saudi Arabia have the highest “enabling environments” for Islamic SME finance growth, with Jordan having “limited” SME offerings and “very low” Islamic offerings. The report also found that Jordan’s depository potential for Islamic SMEs is between $900m and $1.3bn, the fourth-highest level among the nine countries surveyed, behind Egypt, Pakistan and Saudi Arabia, but ahead of Morocco, Tunisia, Yemen, Iraq and Lebanon.

Supporting Start-Ups

The CBJ has unveiled plans to launch a $100m fund for entrepreneurship, the Innovative Start-ups and SME Fund (ISSF), backed by $50m of World Bank financing. On officially launching the ISSF in June 2017, the World Bank committed its support for early-stage SMEs with the goal of providing finance to over 200 innovative start-ups across the kingdom. The ISSF also targets remote regions, underserved industries and female entrepreneurs. The fund will provide an additional $3.5m in support to partner investors. Investments will be split between three high-risk enterprise stages, including seed, early-stage and venture capital. Technology, media, telecommunications, services, agribusiness, pharmaceuticals, water and green energy sectors will be prioritised.


Microfinance, too, has offered a boost to SME lending. The 1990s saw the widespread adoption of microlending through the launch of public entities, such as the MicroFund for Women, Ahli Microfinance Company, the Middle East Microfinance Company and the Jordan Micro Credit Company (Tamweelcom). The kingdom’s microfinance segment is now one of the fastest-growing areas of the banking industry, with 300,000 borrowers and a gross loan portfolio of $254.2m, or 0.5% of GDP, as of 2013. Jordan’s micro-finance assets are of high quality, with only 1.8% of loans overdue by more than 30 days, per EIB figures.

There are four types of providers offering microlending for SMEs: private microfinance institutions (MFIs), commercial banks, NGOs and public institutions. In February 2016 the EIB reported that private MFIs held an 85% market share, with 121 branches concentrated mainly in urban areas. Tamweelcom has reported similarly strong growth, announcing in March 2017 that it had served 622,464 clients since launching in 1999, of which 93% were women, providing 420,982 loans valued at JD303.6m ($428.3m).

Pent-up Demand

Despite the strong growth in microfinance in recent years, there is still considerable pent-up demand for credit. In a February 2016 report analysing data from its MENA Enterprise Survey, the EIB found that just 20% of Jordanian businesses reported no difficulty in obtaining finance, compared to the regional average of 40%, while 43% of local firms reported major or severe constraints to accessing finance, against the regional average of 33%. Internal sources account for some 80% of working capital for Jordanian companies and over 60% of fixed investment in kingdom, with banks contributing 26% of total investment finance and 9% of working capital finance.

Respondents to the survey reported substantial unmet demand for credit; 51% said they needed a loan, and 71% of firms reported being discouraged from applying, compared to the regional average of 48%. Overall, 73% of companies in need of a loan and 36% of all businesses are considered credit constrained.

Credit Bureau

Improving risk management at private sector banks is a step in the right direction to expanding access to credit. The kingdom’s credit information system covered less than 5% of the adult population as of early 2016, according to EIB figures, and the limited availability of financial statements among SMEs has also dampened banks’ appetite for lending.

This is set to change, however, following the launch of Jordan’s first credit bureau in October 2016. Prior to the bureau’s establishment, MFIs operated their own credit information-sharing platform as the public credit registry had previously been available only to banks and had a $30,000 threshold, and therefore did relatively little to ease obstacles to MFI growth.

The new private CBJ-licensed bureau, owned by Italy’s CRIF, is open to lending institutions, banks and MFIs, which will now be able to obtain a predictive score for clients based on their credit histories. The bureau reports that 75% of Jordanian banks are members, and that contributed data covers 94% of subjects and active contracts, significantly improving the ability of private banks to manage SME lending risk. “Centralising all credit information from banks and MFIs in one database will contribute to reducing the length of procedures and tackle the issue of access to information for both credit providers and applicants,” Ahmad Amoudi, general manager of CRIF Jordan, told OBG.


Jordan’s modern insurance sector arose from the need to provide cover for the flow of trade through the port of Aqaba, which rapidly increased after the nation gained independence. In 1951 a group of local businessmen founded the Jordan Insurance Company (JIC), the market’s first domestic insurer.

Over the following decades the market grew rapidly, supported by the Association of Jordanian Insurance Companies, which played an important role in increasing technical competence and introducing the principles of good governance to the sector.

By the 1980s the sector was saturated, with 33 insurers and 23 agencies and branches competing for a relatively modest aggregated premium of JD33m ($46.6m). The economic recession of that decade prompted the government to freeze the issuance of new insurance licences and introduce the Insurance Practice Monitoring Act, which significantly raised capital requirements for providers. As a result, by 1987 the number of domestic underwriters in the market had fallen to 17.

In 1995 the government began to issue insurance licences once again, raising capital requirements still further to ensure the stability of the sector. By the turn of the century the number of insurance companies in the market had rebounded to 27, a high number in relation to the size of the domestic market, but one supported by a greater degree of technical probity than had previously been applied to the sector.

Current Climate

Jordan’s insurance sector has recorded moderate growth in recent years, despite deteriorating domestic and external conditions. There are 24 providers, including 15 firms offering life and non-life coverage, seven dedicated non-life and medical insurance companies, one dedicated life insurance company and one dedicated non-life insurance company. Industry gross written premiums (GWPs) rose sharply from JD291m ($410.5m) in 2007 to JD583m ($822.4m) in 2016, according to the Jordan Insurance Federation (JIF). Total paid claims have also been rising, however, from JD207m ($299m) in 2007 to a 10-year high of JD447m ($630m) in 2016. The industry’s total paid-in capital has trended downwards since its high of JD304m ($428.9m) in 2008, falling steadily to JD267m ($376.7) in 2016. Asset growth has followed the opposite trajectory, with industry assets rising from JD627m ($884.5m) in 2007 to a 10-year high of JD916m ($1.2bn) in 2016.

Earnings & Losses

Although the industry recorded accumulated annual losses of JD1m ($1.4m), JD11m ($15.5m), JD13m ($18.3m), JD18m ($25.4m), and JD12m ($16.9m) from 2009 to 2013, respectively, it recorded JD14m ($19.7m) of retained earnings in 2014, JD16m ($22.6m) in 2015, and a 10-year high of JD32m ($45.1m) in 2016. Net profits before taxes also grew, from JD9m ($12.7m) in 2012 to JD33m ($46.6m) in 2016.

General, non-life GWPs accounted for 87.9% of total GWPs, at JD512.4m ($722.8m) in 2016, with life GWPs coming in at JD70.6m ($99.6m). Motor insurance amounted to JD225.2m ($317.7m) of industry GWPs in 2016, or 38.6% of the total, followed by medical with 29.4%, fire (12.8%), maritime (3.8%), general accident (3.1%) and credit insurance (0.2%).

Motor insurance represented 46.4% of all paid claims in the sector in 2016, or JD207.3m ($292.4m). This was followed by medical claims (32.6%), fire (10.5%), general accident (1%) and maritime (0.9%). Total paid life insurance claims rose by 35% in 2016 to hit JD36.72m ($51.8m), accounting for 8.2% of overall paid claims.


Although it has recorded steady growth in recent years, the insurance sector is crowded, with the Jordan Investment Trust (JIT) reporting in October 2016 that the sector is concentrated at the top and fragmented at the bottom. According to JIT data, the top-five insurers in Jordan – Arab Orient Insurance, Jordan Insurance, Middle East Insurance Company, First Insurance Company and Al Nisr Al Arabi Insurance Company – held a collective 47.3% of industry GWP in 2015, while 20 other companies held the remaining 52.7%. This has caused excessive competition and significantly reduced profitability. Low levels of disposable income, rising unemployment and lack of awareness about the importance of insurance has also kept penetration limited to 2.1%, compared to the global average of 6.2%.

“All insurance companies are competing for the same slice of the cake, and this slice isn’t growing. So prices are going down and some companies are losing money and struggling to keep their market shares,” said Rashid Habbab, general manager of Arabia Insurance Company.

Motor Dilemma 

Motor insurance makes up the largest tranche of premiums, so insurers are inclined to write motor business if they aim to build robust portfolios. However, MTPL coverage is mandatory in Jordan, which has negatively affected the line’s profitability. While regulators have debated liberalising MTPL tariffs for many years, annual premiums remain capped at JD63 ($89), meaning the segment is often subsidised by underwriters’ comprehensive motor insurance policies.

“There is a gap between the tariff rate for MTPL cover set by the regulator and the cost of providing this coverage. The industry maintains that freedom of pricing and underwriting of risks would be the best approach, but I believe neither this nor the suggested alternative of an across-the-board rate increase would be acceptable to the government, as it would add pressure in the current poor economic environment,” Raja’ei Noursi, deputy general manager of Delta Insurance, told OBG.

Authorities have introduced gradual reforms, including raising MTPL tariffs by 25% for drivers involved in an accident within the previous insured year, and by up to 100% for accidents resulting in death or complete disability. However, because of the risks associated with the motor insurance segment, it has become increasingly unpopular with companies in recent years, with Gerasa Insurance Company, Arab German Insurance Company and Al Barakah Takaful Company relinquishing their motor insurance licences in the early 2010s.

Supervisory & Regulatory Changes

In 2012 the government dissolved the sector’s independent regulator, the Jordan Insurance Commission, shifting the responsibilities to a dedicated directorate operating under the Ministry of Industry and Trade (MIT) – a move some saw as having a negative impact on the industry.

The Council of Ministers (CoM) announced that it had decided to move regulatory responsibilities to the CBJ in February 2016, promising to implement the change within two years and that it would include sweeping reforms. “We expect that CBJ supervision will increase scrutiny and enforcement, as it has within the banking sector,” Noursi told OBG. The CBJ reports that its insurance reform agenda will include improvements to financial adequacy, upgrades to corporate governance, regulations stipulating the separation of life and general insurance activities, prudential regulatory requirements concerning investment policies, and clarifications to the roles and responsibilities of supervisory agencies.

Headed by the deputy governor, a committee including the acting director of the MIT’s Department of Insurance will be established to oversee reforms. The CBJ is expected to assume its supervisory role before 2019. “In the last 20 years banks have become much more financially stable and recorded major improvements under the CBJ’s supervision,” said Noursi. “We’re hoping for the same in insurance. The other expectation is that the CBJ will push for consolidation.”

Capital Markets

Equity trading commenced in the 1930s, when Jordanians began to buy and sell shares in companies such as Arab Bank, Jordan Tobacco and Cigarettes, and Jordan Electric Power. Trading took place across a number of non-specialised offices rather than a centralised exchange, but in the 1970s the CBJ responded to the rapid growth of the informal market by examining the potential for a formal platform. The Amman Financial Market (AFM) opened its doors to the investment community in 1978.

In 1997 legislation resulted in restructuring of the financial market, dividing the AFM into three new bodies: the ASE; the Securities Depository Centre (SDC); and the Jordan Securities Commission (JSC), which assumed a regulatory role. In 2016 there were 224 companies listed on the ASE, offering securities trading for instruments including stock, bonds, rights issues and unlisted shares, Treasury bonds and bills, and public and private institution bonds.

As the kingdom’s capital markets regulator, the JSC is responsible for detailed monitoring of all trading operations, as well as managing listings, issuances, disclosures and related financial service activities. The SDC acts as a clearance and settlement house for ASE transactions and is responsible for registration, deposits, ownership transfers and for safekeeping listed securities.

Following structural reforms in 2016, ASE listings are classified under a two-tier system. On April 16, 2017 the third market was cancelled. Companies that were listed on the third market and met the conditions of the second market were transferred there. Those that did not meet these requirements or did not submit their audited annual financial statements for 2016 on time were moved to the over-the-counter (OTC) market.

Listing regulations stipulate that first-market companies must have positive pre-tax earnings for two of three consecutive years at a minimum of 5% of paid-in capital, minimum paid-in capital of JD5m ($7.1m) and offer a minimum 10% free float stake if total paid-in capital is less than JD50m ($70.5m). On the second market, companies must have net shareholders’ equity of at least 50% of paid-in capital. The JSC also requires a minimum 5% free float for second-market companies with less than JD10m ($14.1m) in paid-in capital. New listings must spend one year on the second market before being eligible to move to the first market.

Recent Performance

The ASE has dealt with external volatility and diminished appetite in recent years, with total market capitalisation falling from JD19.1bn ($26.9bn) in 2012 to JD17.3bn ($24.4bn) by end-2016, before recovering slightly to JD17.9bn ($25.3bn) by February 2018. According to the ASE’s 2016 Annual Report, the value of secondary trading, which includes securities in the first and second markets, as well as the right issues, bonds, transactions excluded from trading and the OTC market, fell by 9.9% from JD3.5bn ($4.9bn) in 2015 to JD3.2bn ($4.5bn) in 2016. The value of stocks traded through the ASE amounted to 73.9% of total secondary market trading in 2016. Stock prices for 87 of 224 traded companies rose in 2016, while 116 listed firms fell and nine remained unchanged.

The total value of trading declined by 31.8% in 2016, while the volume of traded shares dropped by 29%. The ASE reports that the total number of executed transactions fell by 12.6% in 2016, with trading values – including block trades – hitting JD506m ($713.8m). The ASE’s average daily trading value declined by 31.6%, from JD13.9m ($19.6m) in 2015 to JD9.5m ($13.4m).

After financial services, the industrial sector accounted for the highest amount of ASE trading by value in 2016, at 30.2% of the total, followed by services with 18.2%. Real estate trading accounted for 20.3%, followed by banks with 18.5%, diversified financial services (12.5%), tobacco and cigarette companies (12.1%), transportation (7%) and mining (5.2%).

Foreign Investment

Benefitting from high levels of foreign participation, the ASE reported that the value of shares purchased by non-Jordanian investors was JD938.6m ($1.3bn) in the first nine months of 2017, or 36.4% of total trading values. However, this is a JD339.9m ($479.5m) contraction, against a JD119.9m ($169.1m) increase during the same period in 2016. The shrinkage has been contributed to Lebanon’s Oger Middle East Holding selling its 20% stake in Arab Bank in February 2017, a block trade valued at JD794.4m ($1.1bn).

Purchases from Arab investors from January to September 2017 stood at 63.8% of total foreign trading, or JD599.1m ($845.2m). Non-Jordanian investor ownership of ASE-listed companies stood at 48.8% of the total market value at the end of September 2017, including 36.2% for Arab investors and 12.6% for other foreigners.

Structural Reforms

Jordan ranks as a “frontier market”, following a 2008 downgrade from “emerging market” status by Morgan Stanley Capital International (MSCI). The MSCI market classification system uses four criteria, including openness to foreign ownership, ease of inflows and outflows to foreign investors, operational framework efficiency and institutional framework stability. Because having frontier market status can deter foreign investors, authorities and international partners were prompted to roll out an expansive reform programme aimed at seeing the kingdom regain emerging market status in the medium term.

In January 2017 the JSC, in partnership with the EBRD, launched the CMDSR. According to the EBRD, Jordan is well positioned to operate a healthy capital market, though regulatory upgrades are required. The range of available instruments should be broadened to encourage the use of domestic investable funds and attract new foreign investors. The EBRD also strongly encouraged the government to move forward with long-standing plans to convert the ASE from a public institution into a public shareholding company.

The CMDSR includes a host of recommended reforms: better access to government securities; development of investment funds; the enabling of exchange-traded funds, including commodity and bond index funds; strengthening the JSC’s authority and effectiveness; and increasing involvement and participation of private sector entities, including investment firms, asset and fund managers, and investment bankers.

Steady Progress

The ASE has already been active in implementing a series of changes targeted at modernising the exchange, attracting new liquidity, supporting privatisation and improving transparency.

For example, in August 2016 the exchange launched OTC trading for the first time, offering shareholders of unlisted and suspended companies the opportunity to sell stocks through a market on the exchange’s electronic trading system. Shares from 20 companies were traded, with 17,000 transactions valued at a total of JD9.4m ($13.3m) recorded in 2016.

In September 2016 the Economic Policies Council also issued a set of recommendations for the ASE’s transformation into a public shareholding company, using provisions from Securities Law No. 76 of 2002. In February 2017 the ASE was officially registered as the ASE Company – a state-owned public shareholding firm governed by a seven-member board of directors appointed directly by the CoM.

The CoM formed two committees; one tasked with drafting bylaws and articles of association for ASE Company, and another with evaluating the assets and liabilities of the exchange, and determining its total capital. Although an initial public offering (IPO) is also planned, the government will likely wait until domestic and external conditions develop prior to launching. “It’s not the right time for an IPO given the current situation with revenues and cash flows for listed companies, so we won’t do it until liquidity and activity improve,” Nader Azar, CEO of the ASE, told OBG. “This gives us time, however, to develop a comprehensive plan for how to deliver the best possible IPO, including bringing a strategic partner on board.”


Although it faces external and domestic challenges, Jordan’s financial services sector is well positioned to continue driving economic progress in 2018. With the insurance and banking sectors both on steady growth trajectories – bolstered by ongoing reforms and new SME lending programmes – extended insurance coverage and improved access to credit will further strengthen a robust and well-developed financial services sector. Meanwhile, the ASE’s planned privatisation, coupled with ongoing regulatory modifications, should see it begin expanding over the medium term.

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