Bar-Lev Hi-Tech, 12.10.2021
Introduction
Israeli FinTech Community, Arab Economic Forum, Korat Funds for Economic Development, Israeli Forum for the Advancement of the Economy
Impact and the Small and Medium Enterprises Agency at the Ministry of Economy have set themselves the goal of promoting the adoption and development of FinTech solutions and financial innovation in the Arab community in Israel. This is done in order to reduce gaps and address barriers to the integration of this population group into the economy in Israel, especially in light of the digital transformation of the banking system in the past decade. Financial inclusion through technology, in both developing and developed countries, is beneficial
because technology enables access to financial services among populations who do not have accounts in traditional financial institutions (the unbanked) or among groups with limited access to full financial services (the underserved).
Financial inclusion is defined by the World Bank as:
Businesses and individuals who have access to useful and affordable financial products and services
that meet their needs — transactions, payments, savings, credit, and insurance — delivered in a responsible and sustainable manner.
The analysis of the definition of financial inclusion includes four components: accessibility, affordability,
ease of use (ease of use) and distribution (delivery). The first component includes the option to open a bank account, the second component
refers to the ability to afford the use of financial services, the third component relates to the range of financial products
that are necessary and the fourth relates to the role of the distributing parties in acting in a responsible and accessible manner. Another layer of definition includes
The element of needs, which naturally varies from one population group to another.
1 Financial Inclusion Overview: Development News, Research, and Data | World Bank
Beyond the World Bank’s general definition of financial inclusion, published studies have long shown that technology
Financial services (fintech) are a key to promoting financial inclusion among groups with limited access to the world
In addition, strategies to promote financial inclusion through technology are said to enhance growth
2Traditional banking
and financial mobility, through four layers: the first layer includes a digital identity and an easy and quick option to open
a bank account; the second layer includes the use of an electronic system to transfer and receive payments; and the third layer relies on
The first and second layers allow the exercise of government rights through digital financial instruments (such as receiving, for example.
Social security payments and tax refunds). The fourth and final layer includes access to a wide range of financial services, including
– Taking out loans, saving and investing.
In this context, international bodies have recently begun to question how fintech can not only promote financial inclusion, but also contribute to the promotion of the United Nations Sustainable Development Goals – SDGs. This issue is still in its infancy, but the relationship between fintech and the UN goals indicates the growing role of fintech in promoting social agendas such as reducing poverty and inequality, promoting health, gender equality and environmental health.
Workshop to promote fintech and financial innovation in the Arab community
Against the backdrop of the emerging role of technology as a means of financial inclusion, a workshop was held in October 2021 to promote fintech and financial innovation in the Arab community with the participation of representatives of fintech institutions, associations, business organizations and banks
Commercial and regulatory factors (list of participating entities and link to images in the appendices).
The following issues were raised in the workshop:
1. Studying the rates of financial and technological literacy in light of the digital transformation and social and cultural processes
that characterize Arab society.
2. The availability of data and opportunities to collect data on internet usage rates in general and banking applications
and fintech solutions in particular.
3. Examining the usage rates and usage characteristics of different payment methods – cash, credit cards, e-wallets,
Payment applications and online banking in the Arab community.
4. Studying the Hebrew language as a barrier to financial technology activity.
5. The status of religion and Sharia rulings as a barrier to the consumption of financial services.
2 Sustainability, Fintech and Financial Inclusion European Business Law Review
(2020) 21: 7–35 https://doi.org/10.1007/s40804-020-00183-y.
6. Studying the alternatives available among groups with limited access to traditional banking services (such as an account at the Postal Bank or
taking loans from associations, for example.
7. Studying the adoption of digital wallet activity among foreign workers in Israel and studying its adoption by the Arab community.
8. Studying the separation between personal financial behavior and commercial financial behavior among families that run small businesses.
Based on the familiarity and experience of most of the workshop participants with the Arab community in all its details, the participants put forward the list
of the following topics as obstacles to access to financial services:
1. Lack of trust in the financial system and the high percentage of people who do not have bank accounts.
2. Preference for increased use of cash over advanced payment methods such as credit cards, applications
payments and electronic wallets.
3. Greater reliance on services provided by the human factor over digital tools.
4. Hebrew language, which makes it difficult to understand instructions and fill out forms. Workshop participants were told that Hebrew language is not a major barrier, but is seen as a major cultural element.
5. Limited access to bank credit and resort to non-bank credit in the absence of other alternatives.
6. Blurred boundaries between personal financial management and business management, making it difficult for families who run their own businesses to have a small organization at the same time.
7. High costs of banking services, which reduces access to (affordability of) financial services.
8. Non-bank credit that is repaid as usual is not taken into account when determining creditworthiness in the traditional banking system.
