The Ministry of Labor in Ramallah in the West Bank launched the program Oct. 3, and the Bank of Palestine is allocating the financial portfolio. The Palestinian Fund for Employment and Social Protection (PFESP), in partnership with the ministries of labor and finance, will manage the program in the Gaza Strip, the West Bank and Jerusalem.
Funding for micro and small enterprises will be based on proposals submitted by unemployed graduates in an attempt to alleviate unemployment, integrate youths into the labor market, promote entrepreneurship, boost production and achieve sustainable development.
The program offers personal soft loans of $15,000 at a maximum interest rate of 5%, maturing in five years; loans may be extended in some cases. Applicants may submit their proposals to PFESP branches in the governorates. Proposals are assessed and reviewed by the Bank of Palestine and a committee formed of employees at PFESP and the ministries of labor and finance. Proposals can be submitted for enterprises in various services and production fields. Enterprises with a higher rate of success and feasibility rates will be chosen to benefit from the loan.
Al-Monitor spoke to Ezzedine Ahmed, 24, who graduated in information security engineering from the Department of Computer Science at the University College of Applied Sciences in Gaza. “I graduated three years ago and am still unemployed,” he said. “But it's difficult to resort to financing programs because the margin of risk for small enterprises in the Gaza Strip, plagued by the acute electricity crisis and the siege, is very high.”
Ahmed said the government must provide alternatives more efficient than financing programs to ease the unemployment crisis. “By taking out a loan, I risk putting myself into another financial predicament if I'm unable to repay the loan in due time,” he said, noting that the Gaza Strip is in dire need of an integrated economic strategy.
Kholoud Samir, 27, graduated from the Journalism and Media Department at the Islamic University in Gaza. She hopes to open her own ceramic accessories business. Samir told Al-Monitor that she had previously tried to obtain funding through Palestinian business incubators, but the procedures and requirements were too difficult. “Business incubators require a guarantor who must be employed and who must have an account at a Palestinian bank," she said.
“One of the incubators required an alternative plan to market the products abroad if local marketing failed. This is exhausting and almost impossible in light of the siege and closure imposed on the Gaza Strip,” Samir added.
PFESP executive director Imad Hussein told Al-Monitor that PFESP wants to create jobs to combat unemployment and poverty. He affirmed that boosting production is crucial to bolster the national economy and increase per capita income. Hussein also hopes the program will stimulate production cycles, decrease imports and raise awareness of the importance of individual production enterprises. “PFESP is keen on spreading a culture of production instead of the consumer culture. Most Palestinians pursue university studies just to get a post in the public sector.”
He continued, “We won't be able to build a liberated Palestinian economy and break free from our economic dependency on Israel without individual production enterprises.”
To obtain funding, applicants must be unemployed persons, ages 20 to 40, Hussein said. Applicants should have a guarantor who is an employee receiving a salary through the Bank of Palestine. If the applicant is unable to find a guarantor, he or she must submit to the bank a cash or in-kind guarantee covering at least 85% of the loan value.
“There are no conditions related to the field of the production enterprise. The proposed enterprise should only be highly successful,” he said. “PFESP’s specialized economists will help the applicants conduct feasibility studies, offer them financial counseling and management advice, and ensure all facilitations to see to the success of their micro and small enterprises.”
The program is a long-term one, and if it proves successful, loan amounts could be increased, Hussein added.
Economic analyst Maher Tabbaa argued, however, that this lending program won't be helpful to Gaza residents.
“Loans are hard to get in Gaza, in particular after the salary cuts of PA [Palestinian Authority] employees in the Gaza Strip. It's not easy to find a guarantor or to offer a guarantee equivalent to 85% of the value of the loan,” Tabbaa told Al-Monitor. He added, “The difficult economic situation in the Gaza Strip makes it an unsafe environment for small enterprises. Major challenges await these enterprises — most notably, power outages and the high cost of alternative energy.”
Tabbaa further explained that small enterprises are hindered by the lack of legislation and regulations to support them and exempt them from taxes or customs.
“Small enterprises are subject to the same administrative and financial procedures [that apply] to large enterprises. Moreover, an unemployed person could find himself in a worse situation if the project he embarked on failed, leaving him unable to repay his loan," he said.
Tabbaa called on the government to develop efficient projects that will successfully combat the unemployment crisis and prevent complete economic collapse.