Libya’s banking sector was somewhat underdeveloped before the 2011 conflict, and its government-controlled banking system served primarily as a means to finance public projects with deposits. Due to the introduction of new players, innovative products and services and regulatory reforms, the banking sector in Libya and Misrata has undergone significant changes. The Central Bank of Libya (CBL) and the Libyan Foreign Bank – which is 100% owned by the CBL – oversee and regulate the industry, with the Bank of Commerce and Development, the National Commercial Bank and Sahara Bank among the most significant players. In Misrata, the largest banks include the National Commercial Bank and the Libyan Islamic Bank.
The beginning of the conflict disrupted Libya’s financial sector, leading the National Transitional Council to establish the CBL to manage the country’s financial affairs until the end of hostilities. Subsequently, the foreign currency holdings of the CBL were unfrozen in December 2011, and the bank was able to use these funds to resolve the liquidity crisis that was facing the country’s financial system at the time. In August 2023 the Central Bank was reinstated as a unified sovereign institution, after it was split into a western and eastern branch in 2014 due to civil conflict.
Despite the economic and political challenges, the banking sector in Libya and Misrata has performed well in recent years, with total assets, deposits, loans and advances all showing growth. However, the sector has faced challenges, such as high levels of non-performing loans and liquidity shortages. The industry is expected to continue to grow thanks to a rebounding economy and greater disposable income. The banking sector is also introducing new products and services to meet the needs of customers, such as mobile banking apps.
Lending to small and medium-sized enterprises (SMEs) and households is a critical area of focus for the banking sector in Libya and Misrata. However, receiving financing remains a challenge for many SMEs due to high collateral requirements and limited access to credit. To address this, banks have introduced dedicated units to make it easier for SMEs to gain access to credit and develop a more supportive environment for business entities. Tools such as mobile banking apps have also improved the access of SMEs and households to credit, offering them convenient and affordable financial services.
After conducting a review of the sector, the World Bank made a series of long-term policy recommendations in its February 2020 report “Libya Financial Sector Review”, including implementing transparency and governance mechanisms, improving technical competencies and strengthening the CBL’s capacity. Through strategic policy measures, the banking sector could contribute greatly to Libya’s economic growth and development.
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