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SME and Entrepreneurship Policy in Israel 2016

image of SME and Entrepreneurship Policy in Israel 2016

This report examines Israel’s performance in stimulating SMEs and entrepreneurship and makes recommendations for government policy. A dual economy has gradually emerged in Israel, in which high rates of successful technology-based entrepreneurship contrast with low average productivity and growth in traditional SMEs. Israel has excellent framework conditions and programmes for technology-based start-ups and SMEs in areas such as R&D, high-level skills generation and venture capital finance. These strengths need to be maintained. At the same time, more needs to be done to spread success to all types of SMEs and all groups of the Israeli population. This report recommends a range of new and expanded interventions for example in access to credit, broad innovation, workforce skills development, management support and entrepreneurship education. It recommends underpinning these actions with a national SME and entrepreneurship policy strategy and new arrangements for inter-ministerial co-ordination.

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Entrepreneurship and SME development in the Arab Israeli population

Arab Israelis account for approximately 20% of the country’s population but their incomes and labour market participation are much lower than the national average. Stronger SME and entrepreneurship development in the Arab Israeli community could promote national growth and help address inequality. Although the overall business start-up rate for Arab Israelis appears to be similar to the population as a whole, it is less likely to be opportunity-driven and start-up rates for Arab Israeli women are low. Existing Arab-owned SMEs are relatively small and heavily concentrated in low productivity sectors. The barriers that need to be addressed include reliance on constrained local market demand, limited workforce and management skills, poor access to finance, and difficulties finding appropriate business premises. The government has taken important steps forward with the creation of a dedicated Authority for Economic Development of the Minorities Sector (MEDA) and the introduction of a new 5-year economic development plan for the Arab sector to be implemented across all government ministries and agencies. However, a larger-scale effort is needed, with greater emphasis on the use of public procurement, improving business management and supporting access to finance for Arab Israeli SMEs and entrepreneurs. Enhanced resources are also needed for policy co-ordination and outreach by MEDA.

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