The Israeli Parliament (Knesset) has approved a law providing for the creation of a new database to collect credit information on small and medium-sized business entities.
The new system will serve to reduce information asymmetry between lenders and entrepreneurs, strengthen competition in the credit market, and facilitate access to financial resources for businesses.
According to Ministry of Finance estimates, the new credit database will allow small and medium businesses to save at least 1.5 billion shekels per year. Furthermore, interest rates on business loans are expected to decrease by at least 1 percentage point.
Currently, many small businesses in Israel can only obtain credit from the bank where they hold an account. The new system will enable other banks and financial lending institutions to assess the financial standing of enterprises. This will create conditions for entrepreneurs to obtain credit on more favorable terms.
It should be noted that this initiative was brought to the agenda following the successful results of a credit database created for individuals in 2019. That system led to increased competition in the consumer credit market in Israel. As a result, the share of banks in the consumer credit market fell from approximately 88 percent in 2020 to 79 percent in 2023. During the same period, the market share of non-bank credit organizations and credit card companies increased.