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High stakes: African asylum seeker entrepreneurs in Israel

Ilana Pinshaw | 28 October 2014

Of 48,000 African migrants in Israel, the majority are asylum seekers from Sudan and Eritrea. If it is done right, entrepreneurship can play a vital role in integrating these refugees into Israeli society and responding to market niches.

There are currently around 48,000 African migrants in Israel, the majority arriving as asylum seekers over the past decade from Sudan and Eritrea. Beyond standard entrepreneurship and migrant challenges, these individuals face greater barriers due to their uncertain legal status and an unwelcoming political climate. Microfy believes that asylum seekers have far greater potential than is recognized by the Israeli government and began supporting women entrepreneurs to develop small businesses in 2008.

Why entrepreneurship?

African asylum seekers in Israel are currently granted temporary visas which must be renewed every few months and they are permitted to work. However, most Israeli employers are disinclined to employ asylum seekers due to them being labelled as ‘infiltrators’ and ‘criminals’ and policies that deliberately mislead the public as to their status. As a result most are employed in low-wage, low-status temporary jobs as cleaners or dish washers (on the legal status of asylum seekers, see for example Paley, 2011, Tsurkov, 2012).

Business ownership can play a very important role for asylum seekers. As job opportunities are highly limited, self-employment presents an opportunity for independence, self-support, freedom to pursue interests and status in the community. A study of African restaurant owners (including both asylum seekers and a few with refugee status) found that some restaurant owners even took on a second job to support their unprofitable businesses, because of the pleasure and status being an entrepreneur gave them (Barak-Bianco, 2013). Business owners interviewed by Barak-Bianco and Microfy speak of their desire to dream and take more control of their lives.

Business owners also play an important role in the community, providing products and services not offered by the host community, such as traditional food, clothing or hairdressing, or simply communal spaces where migrants can congregate and feel comfortable.

Challenges

Asylum seeker entrepreneurs in Israel face a number of challenges. Some are general challenges encountered by migrants moving to a more developed economy, while others are specific to Israel.

Microfly’s findings in Israel are similar to those of Gea Wijers on Cambodian migrant entrepreneurs: most asylum seeker entrepreneurs are limited to micro or small businesses that target only the relatively small migrant community. This leaves businesses vulnerable to the same forces that drove them to entrepreneurship:  vacillating legal and political conditions and a low-income client base.

The legal grey area inhabited by asylum seekers in Israel makes entrepreneurship even more difficult and complicated than usual. Most asylum seekers are unable to legally register their businesses with municipal or tax authorities. As a result most businesses are crowded into a few streets where the authorities will sometimes turn a blind eye to unregistered businesses operating and landlords charge artificially high rents.

Despite all these challenges, business ownership is still an attractive option to migrants. Unfortunately, they tend to see an existing successful business, think ‘I can do that too’, and enter the market providing the same service without assessing the risks, pricing or profitability. In some sectors, this results in overcrowding and lowering of prices to unsustainable levels. We can see this most clearly in the case of day care centres, where the fees charged are less than a third of what is charged in the cheapest Israeli equivalent, and untenably large numbers of children are found at each centre.

Partial solutions

Microfy operates business training courses that begin by facilitating the ability of asylum seekers to think about the future and what they wish to achieve, even in the face of insurmountable obstacles. Aside from the empowerment aspect, the training also encourages entrepreneurs to think ‘outside the box’, that is, move away from the tendency to simply replicate existing businesses.

A good example is Tsego, an Eritrean man who previously owned a restaurant. He has good connections within the local community and with Israeli Ethiopians because he speaks Hebrew and Amharic as well as his native Tigrinya. He closed his restaurant during a period of sickness because he couldn’t find someone capable of running it in his absence (a clear skill gap). He is now looking for a new business opportunity. Guided by a professional business consultant and given feedback from peers in a group workshop, he has been able to systematically consider the risks and market potential, and his existing skills and connections. Rather than reopen a restaurant - a capital intensive and high risk endeavour – he is now considering operating as a supplier, using his connections with both Israeli importers and local restaurants to fill a gap in the market. He has performed this task in the past, but had not previously recognized it as a potential business.

Entrance into the Israeli market requires substantial capital and includes risks. Many entrepreneurs are not aware of the risks and assume that businesses will be profitable without assessing pricing or taking all expenses into account. Clients are taught to calculate the break-even point of the business,including both direct and indirect expenses, and pricing options, to avoid the tendency to create unsustainable businesses. Planning is another important lesson, as clients tend to pursue opportunities immediately (such as an available space) without prior thoughts as to funding or profitability. One client, who had worked in a day care centre, wished to open a business in her apartment, but the fees would have barely covered more than her rent, even as she was caring for six or seven children under three years alone. Microfy discouraged her from opening the business.

Understanding the authorities is another important lesson as the regulatory framework in Israel is completely unfamiliar to migrants from Africa – even taxation is a foreign concept to most.

Access to credit is critical, as asylum seekers are cut off from traditional banking instruments. With the support of Kiva, Microfy provides asylum seeker entrepreneurs with loans of 10,000-30,000 shekels ($2,800 - $8,500) as start-up and growth capital. Loan applicants must participate in training activities, and complete a business plan. Consultants work with clients throughout the life of the loan to maintain their motivation, commitment to repay the loan and assist in developing the business.

With support and guidance, growth beyond a ‘family business’ is possible. One case is that of Leyla, a Sudanese woman who began a hairdressing business with the support of a loan from Microfy. Leyla participated in Microfy training and learned basic business management skills. Subsequent loans enabled her to grow her business, to the point where she was able to move to a larger location and hire more hairdressers. She also moved one street across in order to be able to access Israeli clients (usually with an Ethiopian background), who were less likely to visit a business in her original location. She now even employs an Israeli hairdresser, representing very successful movement into the local market.

Moving forward

The most important need for asylum seekers in Israel today is a change in the political climate to recognize African migrants as potential growth opportunities rather than criminals, and legalisation on their status, enabling them to register their businesses legally and ensuring a more stable customer environment.

Beyond this, continued education for migrants to understand the regulatory environment, and basic understanding of balance point and profitability of a business is critical. We have found that extended training sessions are not very successful as attendance is patchy. Instead, we are moving towards a model of very short initial training on basic business planning and management, followed by ongoing consultancy in a small group format to build business plans. Loans will be granted in this small group format, and consultancy will continue through the duration of the loan. This aims to improve business sustainability and repayments on loans. The group format is very important as it acts as a feedback mechanism and also as support through the challenging process of starting and running a small business.

References

Barak-Bianco, A. (2013) Ethnic Entrepreneurship in Limbo: Eating Places of refugees from Eritrea and Sudan in Tel-Aviv (In Hebrew), Thesis, Haifa University.

Kruchik Krell, A. (2011) The Impact of Microfinance on African Refugees In Urban areas. CASE STUDY: Congolese Refugee Women in Tel-Aviv. Microfy

Photo credit main picture: maygolan / via flickr

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Ilana Pinshaw

Ilana Pinshaw is Director at Microfy, a non-government organization in Israel that promotes busin...

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