Direct your attention to Israel and you’ll see why Tel Aviv is becoming the next Silicon Valley. Startup Genome recently came out with a report on the world’s top startup ecosystems, ranking Tel Aviv in second place right behind Silicon Valley. If that isn’t enough to convince you, Google recently launched its second “Campus” in Tel Aviv, a 16,000-square-foot nest for startups and entrepreneurs.
The social entrepreneurial space isn’t without activity either. Over the summer, a group of students held the Social Entrepreneur Exchange Israel to bring together Israeli social entrepreneurs and those from abroad to learn from one another.
Now, a new report by the Milken Institute, “Building a Social Capital Market in Israel,” explores ways that impact investing can help Israel’s social sector evolve.
Spending in the social sector to dispense critical services is among the highest in the developed world at 5.6 percent of GDP, yet the country is behind in employing the relatively new “impact investing” tool, which aims to deliver social impact alongside a financial return to investors.
“We identified a large gap in the marketplace, which is an important step toward building a complete social investing system in Israel,” said Glenn Yago, senior director at the Milken Institute. ”We’ve captured the best advice of top experts in impact investing, and we believe the time is right for bringing new approaches to Israel, where there’s great receptivity to innovation.”
The report came together from a Milken Institute Financial Innovations Lab held in May where the National Economic Council and leaders in Israeli, U.S., and UK social investing markets met to help prepare a roadmap for a social investing framework.
It recommends ways to overcome barriers, such as legal and regulatory restrictions, revenue challenges, and access to capital. It details approaches for scaling up current financing programs, replicating best practices from other nations, establishing a social investment fund, and creating policy tools to provide incentives for social investment in Israel.
Increasing limits on tax deductions, allowing tax credits to be carried forward and made transferable, and instituting tax-exempt financing can be used to attract capital to Israel’s social investment market.
The report also suggests a number of policy changes:
Source: Milken Institute
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