Israel strong Fintech Ecosystem

With a GDP per capita of $42,823.00, Israel is considered to be a developed economy. Moreover, GDP is projected to grow robustly by 5% in 2021 and 4.5% in 2022 (Oecd, 2021). However, in the past months Israel has been going through difficult times that affected many lives. Likewise, there is still relatively high poverty and inequalities as 25% of Israel are poor (Santander, 2021)

One of the most important and developed sectors in Israel is Science and technology. Actually, Israel spent 4.3% of its gross domestic product (GDP) on civil research and development in 2015, the highest ratio in the world. High technology (aeronautics, electronics, telecommunications, software, biotechnologies, etc.) represents approximately 40% of the country’s GDP and 9.2% of employment. Also, there are over 6,000 active startups and the economy is dominated by industrial high-tech and entrepreneurship (Deloitte, 2021)

Fintech in Israel

Fintech in Israel is one of the most advanced countries in the Middle East and Africa region alongside the United Arab Emirates (UAE). In fact, it is considered as a tier-one premier Fintech hub in the Middle East and Africa (MEA) region. Also, is one of the countries with the highest number of Fintech with over 750 Fintech startups (Fintech Times, 2021)

Some factors that contribute to the fast growth are the high mobile engagement, powerful accelerator programs and the workforce since Israel enjoys the highest percentage of engineers and scientists per capita in the world.  Moreover, the small population of just 8.5 million has made it possible for Fintech to be prepared for international expansion (Itrade, 2021)

Lending Fintech

Even though the Fintech ecosystem in Israel has grown in the last couple of years, the lending sector is still in a developing early phase. Actually, when it comes to SME lending only 0.1 per cent of the market is provided by Fintech companies, since 98 percent of lending to SME is controlled by five big Banks. This distribution is skewed by 70 per cent and up to 90 per cent compared to other developed markets (Altfi, 2021).

Nevertheless it is important to note that Israeli SMEs contribute more than 50 percent of GDP and employment but receive less than 20 percent of business debt. In fact, Israel’s SMEs are craving for additional funding. 70 percent of SMEs say they lack sufficient financial solutions. Fintech could be an option; however, there are some obstacles that make it hard for Fintech to offer lending easily. One of these is the fact that Israel is one of the few developed countries in which a business needs a license in order to provide lending to companies. This is the main reason why there are very few Fintech lenders in the country and that many international players haven’t entered Israel yet (Altfi, 2021).