Despite a stable banking system – and the recent charm offensive – Lebanon still faces an uphill struggle luring international firms to its borders and becoming a major Gulf financial centre.

However, financial services companies have another motivation for moving there – tapping into rich supplies of comparatively cheap talent.

The political instability in Lebanon has obviously hampered Beirut’s development as a financial centre. But, having avoided external shocks, the country’s banks have remained well-capitalised and stable throughout the global financial crisis.

There are signs some firms are beginning to recognise its appeal – Arqaam Capital plans to open a Beirut-based equity research firm which could eventually employ 100 analysts, JP Morgan has a local presence, as does Deloitte, Bank of New York and Commerzbank, and Standard Chartered is considering opening a Lebanon office.

Still, job opportunities for investment bankers remain thin on the ground – there are just 12 firms registered with the Association of Banks in Lebanon. Overall, 18,632 were employed in the Lebanese banking sector at the end of 2008, according to ABL statistics.

Magdy El Zein, managing director of executive search firm Boyden Middle East, says: “Satellite offices remain the order of the day in Beirut at the moment, but there’s a huge pool of investment banking and wealth management talent there. International banks can recruit them – relatively cheaply – and then transfer them to their main Gulf operation in Dubai.”

Certainly, there’s no shortage of Lebanese luminaries among the upper ranks of investment banking (particularly at Morgan Stanley, if you include ex-CEO John Mack).

Walid Chammah, co-president of Morgan Stanley; George Makhoul, former president of Morgan Stanley’s Middle East operations; George Bitar, former co-chief investment officer at Merrill Lynch Ventures and Makram Azar, the new head of investment banking for the MENA region at Barclays Capital all hail from Lebanon (even if they were largely Western educated).

But Beirut also has another thing going for it – it’s cheap. Firms are increasingly eyeing the city as a low-cost destination for back office functions. A survey of 100 senior regional financiers at Arqaam Capital Dubai Beirut Forum showed that 57% believe this trend is likely to increase over the next year.

“Lebanese financial services workers are highly commercial, highly-skilled and well-educated,” says Peter Jones, director of Middle East focused headhunters MRK Consulting. “It also costs a lot less to employ them than in other GCC states, which makes them an appealing prospect.”