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Israel lags behind in SME numbers

Ministry of Industry, Trade and Labor survey shows small and medium enterprises in Israel have lower than average productivity rates as compared with their OECD counterparts, mainly due to heavy regulation, little financing and lack of knowledge

Hadar Kane, Calcalist
Published: 11.11.12, 13:52 / Israel Business

Israel's small and medium enterprises (SMEs) employ a lower number of workers, are hindered by more constraints and have lower productivity rates than their OECD counterparts, according to a recent survey by the Ministry of Industry, Trade and Labor based on data from the Central Bureau of Statistics, Calcalist has learned.

 

According to figures compiled by the ministry, there are some 450,000 miniature, small and medium businesses in Israel which employ up to 100 workers. Such enterprises constitute over 99% of Israel's businesses, account for 55% of the country's workforce and for 45% of its GNP.

 

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Yet, according to a survey by the Knesset's research center, SMEs received only 62.3% of the bank loans and credit lines granted the business sector in 2011.

 

According to Ran Kiviti, director of the Ministry's SMEs agency, "Figures show that small and mid-sized businesses in Israel are a particularly weak sector, stemming from three main reasons: Extreme regulation, hard to obtain bank credit and loans, and the absence of knowledge due to the lack of a professional managerial rank in small businesses".

 

The OECD recently released a scoreboard ranking SMEs and financing in its member states. Since Israel is absent from the report, the Ministry of Industry relied on CBS data to obtain a picture of the country's SMEs.

 

Figures show that on many indices, Israel falls behind its OECD counterparts by a wide margin, and that there is a substantial gap between SMEs and large businesses in Israel.

 

SMEs were rated on three indices: The number of employees, added value and level of competitiveness.

 

Insofar as SMEs employee base, in the category of minute businesses (1-50 employees), the sector has the smallest number of employees, among OECD states. Insofar as added value, which examines the contribution of businesses in the process of turning raw material into final products in terms of salaries and net profit, Israel ranks at the bottom of the OECD member list.

 

Insofar as competitiveness, which gauges SME's life expectancy, the number of new businesses in Israel is low as compared to the rest of the world; however, the number of shutdowns was low as well as compared to other OECD states.

 

Despite the survey's results, Kiviti is optimistic: "We realize that Israel is doing poorly when it comes to SMEs, but we can also see that there is much room for improvement and this can breed opportunity".

 

As a first measure, the Ministry of Industry, Trade and Labor has decided to establish an agency which will offer SMEs tools and assistance and it is currently holding a tender to choose an operator of the field array.

 

This report was originally published in Hebrew by Calcalist

 

 

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