Abdulkhalek bin Ashuor has a dream: painless, hassle-free banking from the comfort of his mobile phone. "The unavailability of ATMs and credit cards in Libya makes life hard," he says. "For an expensive item like a car, you normally have to pay 100 per cent up front. So you bring paper notes in a bag."
Luckily for Mr bin Ashuor, he happens to be the chief executive of Al Madar Al Jadid, one of Libya's two mobile network operators. His company is set to launch a mobile banking system, which he hopes will take off as banks modernise and Libya's government cedes decades of state control to encourage economic dynamism. According to analysts, such reforms are starting to create opportunities for entrepreneurs such as Mr bin Ashuor and for foreign banks looking to expand into Libya.
This month, Libyan authorities granted a banking licence to Italy's UniCredit, which beat five contenders including Dubai's Mashreqbank and Emirates NBD. Appetite from such banking heavyweights cheers policymakers in Libya, which is seeking foreign partners for a banking sector isolated after the 1969 coup that brought the country's leader, Muammer Qadafi, to power. Toppling the pro-western King Idris and abolishing political parties, Mr Qadafi set up a system of committees with himself as "Brother Leader and Guide of the Revolution".
The economy was restructured from the mid-1970s along socialist lines, with the nationalisation of industries including banking. However, Libya struggled in subsequent decades as the US and UN piled on sanctions in response to Libya's support for militant groups and alleged involvement in the 1988 bombing of PanAm Flight 103 over Lockerbie, Scotland. In the 1990s, "Qadafi realised that he needed to have a private sector", says John Hamilton, a Libya expert at Cross-border Information, a British risk analysis firm.
"He needed an accommodation with the West, because economic prosperity was a precondition to the survival of his political system." In 1999, Libya surrendered two suspects in the 1988 Lockerbie bombing and in 2003 renounced its quest for a nuclear weapon. By 2004, all sanctions had been dropped. That year, the government announced plans to modernise the banking sector, part of larger reforms to open Libya's economy to international markets.
In 2005, the Libyan central bank was made independent. A partnership established between the state-owned Sahara Bank and France's BNP Paribas in 2007 kicked off the entry of foreign banks into the Libyan market. The following year, foreign commercial banks were allowed to operate in Libya, which today hosts branches or subsidiaries of banks including Abu Dhabi's First Gulf Bank, the National Bank of Abu Dhabi, Qatar's Masraf Al Rayan and the British Arab Commercial Bank.
Libya's main goal is to attract foreign expertise to speed modernisation, Mr Hamilton says. For foreign banks, the potential benefits of doing business in Libya look set to expand. "The population has almost nothing in the way of banking services, so it's a huge, fresh market," Mr Hamilton says. "There's a lot of money in Libya, and the economy is opening up in dramatic ways." That opening has included the return of Libyan private banks. One of them, the Bank of Commerce & Development, is backing Mr bin Ashuor's mobile banking project.
"They're very flexible in taking decisions," he says. "Because they're private, they don't have to go through a formal bureaucracy and chain of command, and they were among the first to introduce things like credit cards and Western Union." Such services are largely absent from Libya's retail banking, says Mustafa Fetouri, head of the MBA programme at the Academy of Graduate Studies in Tripoli, where Mr bin Ashuor is completing an MBA.
"There are almost no ATMs, and you can't use a credit card except in a couple of big hotels," Mr Fetouri says. "What concerns me as an ordinary consumer is the amount of cash I can get and how fast I can pay for things." Since international sanctions were lifted, oil companies have queued up for contracts, and Libya's hefty sovereign wealth fund has given it unprecedented clout in foreign markets.
But closer to home, most banks have little experience in serving a new generation of entrepreneurs, says Mr Fetouri, who plans to set up a Master's course in banking to help address the issue. "The idea of corporate finance - of a corporation financed through lines of credit - didn't exist before," he says. "You used to have the classic loan; we try to teach benefits of having partnerships with banks."
Some observers say that despite the reforms, Libya's banking sector remains subject to the will of conservatives in the political establishment who are wary of change. "They're putting the mechanism of a functioning capitalist economy inside a socialist system," Mr Hamilton says. "That's not going to go without a check or hiccup." The fact that only one foreign banking licence was granted this month - not two as originally announced - could be a sign that liberalisation is hitting political bumps in the road, Mr Hamilton says.
Mr Fetouri, however, says reform will continue in the long term. "The more we integrate with the world economy, the more we'll have to adhere to certain standards and play by certain rules," he says. Mr bin Ashuor, meanwhile, is focused on launching his mobile banking project. A test run over the summer with the Bank of Commerce & Development has yielded positive feedback. Now he is seeking to get the state-owned Gumhouria Bank, one of Libya's largest, on board as well.
By linking phone and bank accounts via a closed network, Mr bin Ashuor aims to simplify a number of activities, including account management and bill payment, to a few taps on a mobile phone keypad. "As a concept, it's working fine," he says. "We just have to convince banks. The customers are ready." firstname.lastname@example.org