Trade Ministry Official: Small Firms Need More Credit Access

Study finds 30% of small businesses say they can't manage to secure sufficient capital for their ongoing operations.

The proposals of a committee looking into how competition can be increased in the banking sector will not solve the problems that small- and medium-sized businesses face in obtaining credit, an official at the Ministry of Trade, Industry and Labor said Thursday.

Ran Kiviti, who heads the ministry's small- and medium-sized business authority, did acknowledge that the Zaken committee's proposed policies would make it easier for small businesses to obtain capital and called the proposed changes "an important step in opening up the credit market." However, he added there were other credit problems that smaller businesses face that were not addressed by the panel.

Among the suggestions of the committee, which was headed by the Bank of Israel's supervisor of banks, David Zaken, was the establishment of an Internet bank and the lowering of management fees paid by small businesses, and having small businesses pay the same fees as households do.

Kiviti said banks frequently refuse to extend credit to these businesses, adding that when they do: "If a business is required to provide security of more than 90% of the amount of the loan, the business cannot use it to expand and develop. High interest rates and limited credit also constitute barriers to required financing."

A study conducted by Kiviti's agency shows that fewer than half of smaller businesses reported that they have sufficient financing at their disposal to expand. Fully 30% said they hadn't managed to secure sufficient capital even for their ongoing operations.

The trade ministry's small- and medium-sized business authority maintains a state-backed loan fund for smaller businesses.