Much of Syria’s reconstruction strategy has centred on attracting large-scale investment from Saudi Arabia, Qatar, the UAE and other international partners into energy, telecommunications, ports, airports and real estate. While these projects are important, they are unlikely on their own to generate broad-based economic recovery. That recovery also rests on improving livelihoods around the country: whether farmers can purchase equipment and small businesses can access working capital. In other words, the success of reconstruction may depend on who can get a loan.
Syria’s public and private banks have emerged from an era in which access to credit was heavily skewed towards firms and businessmen connected to the Assad regime. The reforms now under discussion may help restore lending, but they could also allow politically connected actors to use new ownership stakes to shape the allocation of credit. Preventing that outcome will require rules that make bank ownership, lending to connected actors and exceptional treatment of borrowers visible and contestable.
The limits of privatization and market reform
Large foreign-equity investments and credit serve different purposes. Foreign investment tends to concentrate initially in major urban centres and capital-intensive sectors, where investors can more easily identify projects and manage risk. Bank credit, by contrast, can reach small and medium-sized enterprises (SMEs) across a wider range of regions. Because SMEs make up the overwhelming majority of Syrian firms and often face access to finance as a principal constraint, whether they can obtain credit will be central to the breadth of Syria’s economic recovery.
Syria’s banks are not currently equipped to play that role. Years of conflict, currency depreciation, unpaid loans and international isolation have left Syria’s banks focused on capital preservation rather than lending. Credit intermediation has fallen to extremely low levels as a result.
Recent months, however, have seen a flurry of activity aimed at reconnecting Syria to regional and global financial markets, including the restoration of SWIFT transfers, intensive IMF engagement and plans for greater foreign participation in the banking sector. Syria’s public banks – the country’s largest financial institutions – are reportedly being considered for privatization, conversion into joint-stock companies, or partnerships with Arab and international institutions.
These proposals point towards an expanded role for private and foreign capital in Syria’s banking sector. Such changes may restore lending capacity, give borrowers more potential lenders and strengthen incentives to protect capital and price risk accurately. But even outright privatization would not eliminate the risk of capture. Just as public banks can be influenced by officials, private banks may be influenced by powerful shareholders, directors, affiliated businesses and politically connected borrowers.
Syria’s own experience shows how privatization can shift the channels of influence without producing impartial lending. When Syria opened its banking sector to private institutions in the 2000s, many of the new banks were founded by politically connected businessmen. After the government encouraged banks to resume lending in 2018, these groups were able to secure exceptionally large loans.
The same risk now applies to the next phase of reform. Syria’s reconstruction has already generated concerns about elite capture in the recovery of former regime assets, the sovereign wealth fund, major investment deals, and allocation of public land and contracts. Banking-sector restructuring, privatization, foreign entry and debt relief could similarly redistribute control over credit through processes that remain difficult to scrutinize.
The information deficits that distort credit
Favouritism in lending thrives where information is weak. Banks need reliable information about borrowers – their ownership, liabilities, collateral and repayment history – to assess creditworthiness without relying on personal relationships. Regulators, in turn, need reliable information about bank ownership, lending decisions and related-party exposures to determine whether favourable treatment reflects legitimate assessments of risk or the influence of political and business connections.
Syria’s banks have historically lacked many of the basic tools needed to make lending decisions. The absence of a credit bureau has prevented banks from verifying borrowers’ repayment histories. Financial statements were also often unreliable: in 2005, the most recent assessment, barely one third of Syrian firms maintained audited accounts, while many firms reportedly kept multiple sets of books to conceal income or payroll from the authorities. The World Bank warned that these deficiencies led banks to rely on ‘reputation or personal knowledge’ when extending credit.
These information deficits persist. The Central Bank of Syria’s (CBS’s) 2026–2030 strategy lists the creation of a national credit-information bureau and expansion of the beneficial-ownership registry as reforms still to be completed. Until those systems are operational and reliable, banks will continue to face difficulty assessing borrowers on the basis of risk rather than reputation and personal access.
Regulators will struggle too, and for many of the same reasons. Syria scored just 1 out of 7 on the World Bank’s 2005 disclosure index, reflecting limited information on beneficial ownership, family ties, voting arrangements, and related business interests. Without such information, regulators cannot easily identify connected borrowers or determine who ultimately owns and controls a bank. These problems remain unresolved. One analyst has described Syria’s banks as ‘black boxes’, while recent World Bank assessments lament minimal reliable information.
Banking reform must therefore close the information gap in both directions. Banks need reliable information about borrowers so that connections do not substitute for creditworthiness. Regulators need reliable information about banks, owners, affiliates and lending decisions so that preferential treatment can be identified and challenged. Without both, much of the new credit generated by reconstruction may flow to political and business networks.
Transparency rules for a new banking system
CBS’s 2026–2030 strategy addresses much of the first task: building the information infrastructure that Syria’s banks have long lacked. The strategy envisions a national credit-information bureau, as well as training for bank compliance officers. If implemented, these measures would bring about more impartial risk assessment for lending.
This infrastructure should be accompanied by clear obligations on banks. While the strategy identifies helpful ways to expand the information available to regulators by proposing an expanded beneficial-ownership registry, it is less specific about how it would use these systems to identify and prevent politically connected lending.
The CBS should therefore establish clear rules for lending to related parties, including shareholders, directors, senior managers, affiliated firms and politically exposed persons. It should require banks to identify and report connected exposures, apply limits to related-party lending and ensure that such loans are made on terms comparable to those available to similar borrowers. These loans could face enhanced supervisory review.
Public banks should likewise publish clear criteria for lending, restructuring and debt relief. Neither credit nor debt relief should be allocated based on informal access to ministries or bank managers. As reforms commence, banks should disclose the value of penalties waived, loans restructured and debts written off by sector, governorate, borrower category and loan size. Moving forward, specialized banks could publish annual data on lending by sector, governorate and borrower category.
Finally, the People’s Assembly should be given a defined oversight role. As in other countries, parliamentary committees could review these annual reports on lending patterns, debt relief, and public-bank performance without intervening in individual lending decisions.
The reforms underway in Syria’s financial system may expand the supply of credit, but they will not make that credit broadly accessible if political and business connections continue to determine who receives it. Whether Syria builds the information and oversight needed to govern lending fairly will help determine whether reconstruction broadens economic opportunity or concentrates its benefits among a new set of connected actors.