Israel increased bank lending to businesses by only 3% during Covid – compared to 10% increase worldwide.
- Israel added USD4.3 billion of business loans in past twelve months.
- Lending rises by USD3.3 trillion across 24 major economies.
- More help is needed as lockdown restrictions continue worldwide.
Bank lending to businesses in Israel has increased by only 3% since the Covid-19 pandemic, compared to an average increase of 10% worldwide, reveals a new study by UHY, the international accounting and consultancy network*.
UHY’s study of 24 major economies shows banks in Israel provided just USD4.3 billion of additional lending to businesses in the last twelve months, potentially impacting businesses ability to deal with the pandemic disruption.
UHY says Israel’s economy could recover even more quickly if more bank lending was made available to help businesses through the Covid disruption.
UHY’s study found that banks in Israel lent less credit to businesses during the pandemic compared to major economies such as the US (9%) and China (12%).
During the pandemic, Governments around the world, including in Israel, have been launching Covid loan schemes via banks to help businesses who have been impacted by the pandemic. However, some Israeli businesses in sectors that are at a higher risk, such as those in the hospitality sector, have found it difficult to secure lending.
UHY Shtainmetz Aminoach & Co CPAs says reduced access to these cheap loans meant businesses were unable to get the cash they needed putting their survival at risk.
The firm adds 75,000 businesses in Israel have already ceased trading due to the economic fallout of the coronavirus pandemic. This number could have been reduced if more financial support had been given to these struggling businesses sooner.
The Israel Government launched a USD 2.4 billion scheme last year to support businesses through the Covid disruption and these are backed by an 85% government guarantee. The government has also extended repayment terms for SMEs until at least June 2021, to give businesses greater security for repaying debt when operations resume.
During the pandemic, Israeli businesses with a turnover up to USD6 million whose revenues have been impacted by coronavirus could apply for a special loan to help cover fixed expenses, such as rent and utility bills. This was a third round of Government support to help the local businesses financially.
Kobi Shtainmetz, Partner at UHY Shtainmetz Aminoach & Co CPAs says: “In many ways Israel’s response to the pandemic has been admirable but in the area of providing extra lending to businesses we have lagged. The lack of access to loans for large parts of the economy has meant many businesses in Israel are under a lot of financial pressure.”
“The recovery would likely be quicker if the government did more to encourage banks to lend to businesses in at risk sectors.”
“The economic impact of the pandemic has lasted longer than anyone expected. Government-backed business loan schemes will need to be extended until restrictions are fully lifted.”
“The rapid progress in vaccinations provides a light of the end of the tunnel. But with many businesses still not able to return to ‘normal’ operating levels, Israel needs to provide as much support as possible to ensure businesses stay afloat until then.”
Outstanding lending to businesses across the ten biggest global economies hit a total of USD32.7trillion last year, an increase of USD3.1trillion (10.5%), compared to USD29.6trillion of outstanding loans a year earlier.
UHY’s study found that BRIC countries experienced a particularly large increase in bank lending in the last year, adding USD1.93trillion – a 12% increase on average.
BRIC countries outpaced the G7 (9% growth in lending on average), adding an extra USD1.2 trillion to outstanding loans, reaching a total of USD15 trillion last year. The eight major EU economies in UHY’s study are lagging behind other world economies in increasing lending, adding only 5% to outstanding bank lending last year.
Israel has only increased bank lending to businesses by 3%, compared to 10% increase worldwide.
*Current figures are outstanding loans to businesses at last available date.