This policy brief captures recommendations stemming from a workshop, convened by the Milken Institute Israel Center and the Citi Foundation, that explored how to improve financial inclusion for underserved and disadvantaged populations in Israel. Recent research reports indicate that significant segments of Israel's population are not served by financial institutions -- further limiting the access to capital needed for emerging from poverty.
Over the last seven years, more than 22% of Israeli households are living in poverty, making it the most impoverished country among the world's thirty-four economically developed countries. Small and micro businesses represent 96% of all enterprises in Israel -- employing 60% of the workforce -- while receiving only 20% of bank financing. According to the World Bank, more than 12% of Israel's population in the bottom 40% of the income distribution is unbanked, only 25% of the lower-income population has savings accounts, only 17% has access to consumer credit, and only 25% has savings accounts. While total credit for businesses rose in Israel, the portion provided by banks declined significantly. The difference has been made up by non-banking institutional funding sources that concentrate on top tier corporations and large scale project financing, but not on small or microenterprises.
"Financial Inclusion: Increasing Access for Underserved Populations in Israel" focuses on next steps for developing the regulatory, legislative and financial infrastructure needed to develop microfinance, microenterprises and other financial inclusion products and services.