Facilitating improved finance for small and medium-sized enterprises

Project description

Title: Alternative Approaches to Financial Inclusion of Small and Medium Enterprises (SME)
Commissioned by: Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Palestinian territories
Lead executing agency: Ministry of National Economy
Overall term: 2020 to 2023



Small and medium-sized enterprises (SMEs) and start-ups create jobs and allow many people to earn their own income. However, these types of businesses in the Palestinian territories have insufficient access to financing. As a result, they cannot implement their ideas, create new products and services, successfully access new markets, or realise their full potential. 

It is estimated that there is demand for finance of between USD 630 and 900 million which cannot be met every year. On the demand side, the reasons for this include a lack of knowledge about and confidence in financial products and their providers; on the supply side, there are hardly any innovative alternatives to bank loans, as the relevant regulatory framework conditions are not in place. 

Leasing, factoring (the transferring of a company’s accounts receivable to a finance institute) and insurance are among the main alternative financing options. Innovative products and suppliers who wish to offer client-oriented, technology-based products, are looking to enter the Palestinian market. These ‘fintechs’ offer enormous potential for improving the financial inclusion of broad sections of the population. With this in mind, the government, regulators and private stakeholders agreed upon a national strategy for financial inclusion in 2018: the emphasis of this strategy is on using technology and on educating and protecting the population. 

As a result of the 2020 coronavirus pandemic, the need for innovative technological business models that replace cash and mobility has become particularly urgent.


The framework conditions for financial services for small and medium-sized enterprises have improved.


An improved, easy-to-understand range of information for enterprises, SMEs and start-ups will help counteract people’s reluctance to use innovative financial services. In particular, the project is supporting the Palestinian Capital Market Authority in its work to develop various formats and communicate them in a transparent manner. 
In this context, the project is producing infographics and multimedia and training formats to provide basic financial education to disadvantaged groups. The aim is that users will be able to understand the products themselves and their own rights and obligations, which will put them in a position to make responsible financial decisions. 

Another complementary field of action aims to improve the framework conditions for new fintech providers and business models. This is a precondition for the introduction of new digital solutions for alternative financing instruments and services. In this regard, the project advises regulatory authorities and provides these with training on evaluating and regulating innovations and on facilitating controlled market entries. 

In addition, the project supports regular dialogue between the private sector, the relevant state authorities and civil society also on a regional level. This support aims to improve mutual understanding and coordination of regulatory measures, customer protection and the overall stability of the financial system. Applicable business concepts and market entries of digital solutions are the results of this facilitated coordination among market players.


In February 2020, the Palestine Monetary Authority adopted a strategy for promoting fintech business models. As an accompanying measure, the Palestinian regulatory authorities established new structures internally that aim to improve coordination with the private sector and other important stakeholders, increase the dissemination of relevant information for entrepreneurs and promote innovation. 

In April 2020, the Monetary Authority granted permission for the use of electronic and mobile payment services for the first time. Several Fintech companies have been licensed and are being supervised now.

A regular dialogue between the private sector, relevant government agencies and civil society is established and ongoing. 

Last update: May 2021

Additional information