Mashav (Israel): empowering estearn Europe women through entrepreneurship

MASHAV in cooperation with UNECE organized a program for professionals from Russian speaking countries, to explore aspects of entrepreneurship as a contributor to income generation and employment, including planning, development, and management of small businesses.

The program was organized by MASHAV’s affiliate the Golda Meir Mount Carmel International Training Center (MCTC) in cooperation with the United Nations Economic Commission for Europe (UNECE) for 26 participants from Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Ukraine, and Uzbekistan (May 18-June 11).

Promotion of women entrepreneurs through the development of Small and Medium Enterprises (SME) has become a priority among many countries, emphasizing the need of ensuring the active participation of women in the development process. Israel has been engaged in supporting small businesses for over 25 years, developing professional support platforms such as Small Business Development Centers (SBDCs) and Technological Incubators, which provide a wide range of services to entrepreneurs and business owners.

The professional MASHAV-UNECE program included topics such as: Good practices and policies in promoting entrepreneurship; Support systems for new entrepreneurs; Women entrepreneurs in a changing economy; Marketing and branding strategies for small businesses; and Entrepreneurial Training and Business Laboratories: hands-on experience in translating ideas into business.

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About SBDC

Recent years have seen increasing awareness and recognition of the role played by small business and its contribution to the economy, especially in industrialized countries.

The major advantages of small business lie in its potential for innovation, flexibility, low start-up costs, rapid development, and the distribution of risk. Small business provides a solution not only to a general unemployment situation but also to the employment problems of special population groups such as new immigrants, women and demobilized soldiers.

Small businesses, however, suffer from obstacles encountered in financing, management, marketing, export facilities, access to information sources and bureaucracy. All of these make it difficult for small businesses to establish themselves and compete in the free market.

The wave of mass immigration from the former Soviet Union which Israel witnessed in the early nineties motivated the authorities in charge of immigrant absorption to focus on small business encouragement. The underlying idea was to find rapid employment opportunities for the immigrants while absorbing them in the economy in their professions and trades. Preliminary studies showed that this could help solve the employment problems of some 10-15% of the immigrant labor force.
Small Business Authority of Israel

The above policy led to the establishment in 1994 of the Small Business Authority of Israel (SBAI), to formulate policies for encouraging small businesses, entrepreneurship and related activities and coordinate the operation of the various agencies working in this realm.

Operating under the auspices of the Ministry of Industry and Trade, the SBAI includes member organizations such as government ministries (Finance, Labor and Social Affairs, Immigrant Absorption, Tourism), business associations (the Manufacturers Association, the Association of Chambers of Commerce, the Craft and Small Industry Association and merchants’ and workers’ organizations), public institutions and volunteer and philanthropic organizations.

SBAI’s major tasks

  • To initiate and apply government policies for encouraging small business enterprises.
  • To coordinate all agencies and bodies operating in the field of small business.
  • To set up local, regional and professional centers for encouraging small businesses; to assist, guide and monitor the activities of these centers.
  • To initiate legislation in the small business sector.
  • To conduct education and training in managing, establishing and operating small businesses.
  • To initiate the establishment of capital funds and other financial resources for small businesses.

Small Business Development Centers (SBDCs)

SBAI’s field activities are carried out by centers located throughout Israel, whose goal is to aid entrepreneurs and small business owners in establishing, managing and expanding their businesses.

SBAI initiates the establishment of such centers and supports them by providing guidance and assistance, granting partial financing and placing professional services at their disposal. The SBDCs are meant to operate as independent, self-sustaining units, rather than as branches of SBAI and are designed as “one-stop shops” which respond to the needs of small business owners and entrepreneurs planning new businesses.

Services provided by the SBDCs

  • Information and Guidance

Initial examination of business concepts, information on permits and licenses required for establishing a business, help in finding business partners and investors, referral to additional information sources.

  • Professional Counseling

The nature and duration of counseling is personally adapted to each business owner. The counseling process can therefore consist of one elementary meeting, a referral to extensive professional consultation, or long-term tutoring. Counseling is provided in diverse subjects, such as preparing business plans, money management, pricing, tax planning, sales management, streamlining production, export and more.

  • Referral to sources of funding

Assistance in the application process required for the special funds set up for small businesses or other financing programs. SBDCs also help in preparing the business plans necessary for obtaining funding.

  • Training

SBDCs offer courses and workshops specifically suited to small business owners or new entrepreneurs. Among the subjects studied are the establishment and management of a small business, money management, preparing a business plan, marketing and more.
Sixty-nine SBDCs are currently in operation and a few more are in various stages of establishment. Most of the SBDCs operate on a local basis, usually in cooperation with economic development agencies of local authorities. Some of them, however, are specialized centers, which operate in fields requiring special expertise or specific approaches, such as the SBDC for the agricultural-cooperative community, the Center for Ultra-Orthodox Women and the Center for Arab entrepreneurs in East Jerusalem (the latter two within the Jerusalem SBDC).

The first SBDC to be established, even before the government initiated its country-wide drive, was the one in Jerusalem. From its opening in 1991 through mid-1996, over 6,200 people have approached the Center for advice. A total of 1,355 businesses have been started or expanded by the Center, of which 530 (40%) are owned by new immigrants.

Over 2,800 jobs have been created with the aid provided by the Jerusalem Center. Over those five years, some NIS 40 million (approx. $14 million) in loans have been approved, though only some 60% of those approved actually exercised their rights to this credit. The number of women who approach the Center is increasing, and last year they accounted for 30% of all applicants. Only 15% of the businesses aided by the Center have failed, a low rate by international standards.

Small businesses are also gaining popularity within the agricultural-cooperative sector of the economy. The severe financial difficulties arising from the declining profitability of agriculture have brought about the establishment of a SBDC whose main object is to aid farmers interested in making the transition from agriculture to small business, without detriment to their cooperative way of life. Some 30 kibbutzim have already appointed small business coordinators, and in most of them businesses have already been launched, with the aid of the SBDC. Some examples are: in Afikim – some 20 small businesses, such as a dog kennel, an air-conditioner repair shop and a children’s wear store; in Mishmar Hanegev and Dvir – software houses; in Beit Hashita – a graphics studio and publishing house; in Dorot – a plant for garlic-based products. Most of these businesses have been established and are run by kibbutz members, who have individual financial arrangements with the kibbutz.
The State Guarantee Fund for Small Businesses

The Fund was initiated with the goal of helping establish or expand small businesses in all sectors of the economy. The government serves as the loan guarantor for bank loans, so that the banks will extend loans to small businesses despite insufficient collateral. Rather than collateral, the banks require a detailed business plan, on the basis of which the application for credit is judged. The Fund is managed by an SBAI steering committee, on which the Ministries of Finance and Industry and Trade are also represented.

The credit limit for a single business is NIS 500,000 (approx. $150,000). The loan is given for a period of up to five years for the purchase of equipment and one year for operating capital. The borrower need provide only the following collateral: mortgage of the fixed assets financed by the loan and a personal guarantee.

Eligibility terms for a loan are as follows:

  • The business may employ no more than 70 workers and its annual turnover may not exceed $5 million.
  • The requested credit line may only serve new business activity, i.e., establishing a new business or expanding an existing one. It may not be used to finance real estate purchases and construction, or to purchase existing businesses.
  • The business owner must invest his or her own capital at a rate of no less than 25% of the total credit approved.

During its first three years of operation the Fund has guaranteed loans to some 2,800 small businesses, for a total of over NIS 600 million (approx. $200 million).
Ministry of Industry and Trade Services for Small Businesses

In addition to the services provided by SBAI and the SBDCs, the Ministry of Industry and Trade also provides services directly to small businesses.

Technological Incubators

The technological incubators established over the past three years constitute a supportive framework enabling beginning entrepreneurs with innovative technological ideas – veteran Israelis and new immigrants alike – to develop their ideas into commercial products and to reach a point at which they can attract investment from the private business sector.

Business Tutoring

The business tutoring project is meant to provide small and medium-sized businesses with managerial aids and professional counseling through training and practice at the level of the individual firm. Some 400 skilled and experienced consultants from the business sector provide professional consulting to enterprises employing between 5 and 100 persons.

Consulting is provided in the following fields: general management, financial management, financial review, production management, data systems and computerization, marketing and human resource management. The Ministry of Industry and Trade covers 75% of the consultants’ fees, and up to 150 hours of consultation for every enterprise.

The SBDCs also runs a tutoring program of up to 20 consultation hours for businesses with 1-4 employees. This program’s goal is to meet the limited needs of such businesses, hence the limited number of hours.

By the end of 1996 the various tutoring programs had embraced over 1,900 businesses in the 5-100 employee range, and over 2,000 businesses in the 1-4 employee range.

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