Palestinian youth tell the human stories behind the numbers in the news

Palestinian youth tell the human stories behind the numbers in the news

Entrepreneurship in Gaza: a glimmer of hope but a high risk of failure

Al-Orjwan Shurrab | 21-02-2019


Young Gazans have many ideas for starups, but the challenges are significant

From the time he was a child, Saleh El-Madani wanted to study industrial engineering. And in most places, it would be a pretty sure bet that the hard work and investment required to earn such a degree would pay off with a lucrative job. But El-Madani also knew that in the Gaza Strip, it wouldn’t be nearly enough. After all, the overall unemployment rate in the Strip is nearly 50 percent—70 percent for young adults. Starting his own business was always on his mind as he progressed through school.

"Young men in Gaza must start thinking about a profitable project for themselves the moment they enter university, since there are so few jobs here,” he reflects. “I developed my idea early on, but there were still so many barriers facing me.”

Entrepreneurship is both an opportunity and a challenge anywhere, but when the place in question is subjected to a prolonged (12-year) siege, in which many materials vital to production are not allowed in and many finished products (not to mention people) are not allowed out, start-ups face a particularly steep risk of failure.

To support budding entrepreneurs like El-Madani, a number of incubators have sprung up in the Gaza Strip to help them develop business plans, secure funding, and market their products and services—often leapfrogging over physical border walls to reach international buyers online

The four main incubators in Gaza are the Palestine Information and Communications Technology Incubator (PICTI); Gaza Sky Geeks (GSG), which is operated by the international NGO MercyCorps and thus has received the most public attention; the Business and Technology Incubator (BTI), run by the Islamic University of Gaza; and the UCAS (University College of Applied Sciences) Technology Incubator. Funding comes from a range of sources, including the Islamic Bank, Oxfam, U.S. Agency for International Development (USAID), United Nations Development Program (UNDP) and the Bank of Palestine.

MercyCorps' Gaza Sky Geeks offers a cowork space for its budding entrepreneurs.

The scope of the incubators varies according to their vision: BTI and GSG both help new ventures launch as well as support already-established projects that need financial or technical assistance. PICTI and the UCAS incubator focus only on the former.

They all operate roughly the same way: Hopeful entrepreneurs submit an online application for support and the incubators evaluate them based on creativity, potential demand for the product or service, the commitment of the applicant(s), how significantly it would contribute to the development of the local Palestinian economy and how many people could be served.

Selected applicants, usually small teams, participate in boot camps and workshops that help them develop necessary skills, such as pricing and marketing. They also are introduced to potential funding sources; some incubators finance selected projects themselves and GSG also has arranged pitching sessions to interested investors. When new ventures are launched, the incubator helps them build networks with related local, foreign and global businesses and NGOs. Mentoring by volunteers from local, regional or international experts and fellow entrepreneurs helps new management teams anticipate and overcome obstacles along the way.  GSG recruits volunteer mentors from around the world, arranging travel to Gaza through its parent (MercyCorps) as well as relying on Skype sessions. UCAS uses online mentors from Jordan and sometimes sends participants for executive training with companies in Turkey.

"Jordan has many excellent specialists and since not all of our participants speak English, this works out well,” says Doaa Seyam, project coordinator at UCAS. “And building good relationships with Turkey and other countries helps get our youth out of this prison."

New businesses in Gaza face all of the usual complications that bedevil startups everywhere, ranging from personality conflicts among team members to lack of sufficient expertise in the field of focus.

"It is critical that team members are entrepreneurial—meaning they have or can develop the knowledge needed to identify and exploit opportunities and are willing to take some risks,” explains Seyam.“They also must be patient and adventurous."

Moamin Abu Oaida, community development and engagement manager for GSG, adds: "Each team must have both expertise and practical experience in the target field among its members."

However, even when such ideal people lineups exist, when they live in a place like Gaza, where both travel and trade are tightly restricted, the challenges are far greater.

"Entrepreneurial projects conceived in Gaza are more likely to fail than in most other places,” says Omar Altabatiby, outreach officer for PICTI. “Their problem is delivery and being able to compete with a fair price when their own cost of doing business is so high relative to their incomes.”

Even when seed money is secured from a donor, such financing often is delayed or suspended due to political or “security” reasons—forcing the projects to come to an abrupt halt.

One aspect of the siege, however, with which these incubators can help is loosening the mental restraints on youths’ minds and creativity. “Most of the young generation have never travelled even met a 'foreigner'," notes Seyam. “So, they don’t even know how to think ‘big’.”

In fact, says Basel Qandeel, an engineer and executive manager of BTI, failure itself is stigmatized, making youth afraid to take risks when their families often must struggle to put enough food on the table. "Their psychological health affects whatever they do negatively."

BTI takes on the most difficult challenges by focusing on production for the Gaza market. Due to the high rate of poverty (80 percent) and unemployment (over 50 percent) in Gaza, residents have very little purchasing power. Incubators that support service-based businesses, such as those related to communications and IT,avoid this obstacle by working online and connecting with international markets.

And then there are challenges related to the internal political divisions. Gazans are not able to register their products or serviceswith the Palestinian Ministry of Internal Affairs in the West Bank and thus are prevented from opening bank accounts in the name of their ventures.

One strategy employed by Gaza Sky Geeks to help its participants get started is to set them up as freelancers. Another is to register new businesses in the United States, so they can operate using an American bank account, says Abu Oaida. Still, failure is common.

To date, GSG has funded six projects and 26 others were started but suspended for various reasons. Ten others are in process.UCAS has funded 58 ideas and of those, eight have progressed. BTI has supported about 10 new projects and180 already-established businesses. (BTI doesn’t track failure ratesand PCTI says it doesn’t report any statistics.)

A cautionary tale

Nashwa Halouq's project was funded by BTI for a year. Halouq, 26, who is married and has three children, developed a type of cheese made with all-natural ingredients and is designed to improve the health of people who suffer from osteoporosis, since it contains additional calcium and phytoestrogen. (Cows and goats are not commonly found and thus are expensive in Gaza; in addition, the equipment to mass produce it is not available. Thus, natural cheeses are not widely available.)

The recipe was the graduation project for Halouq and four of colleagues, and they secured a patent before earning sponsorship from BTI. However, the project needed $20,000 to implement and BTI could provide only $4,000 for the machines and ingredients.

"Our project has faced many obstacles since the very beginning, starting with the funding,” she explains. "Another problem was finding a good production facility. We were given the opportunity to locate in Oxfam's building, but it was in Rafah in the south of the Gaza Strip—far from the center of Gaza and the larger market we needed to serve. We succeeded in providing customers a natural, tasty cheese, and it could have really helped reduce the risk of osteoporosis that is so common here even among young women. But the lack of funding and the overall situation in Gaza prevented success.”

Halouq is not giving up, however. Here team is working on securing a patent for the cheese with the Turkish government and will continue to work to secure more funding.

Stories of success

Art Line

The project developed by El-Madani, now 25, provides advice to already existing businesses, drawing upon the marketing and development expertise he had built while taking related courses. By using text-messaging technology, he figured he could provide advice easily and cheaply. He applied to the UCAS Technology Incubator and became one of its funded projects, receiving an initial grant of $5,000—about 70 percent of what was needed.

Today, his business, called “Art Line," employs six and has expanded to online consultation to serve customers outside of Gaza. About half of his 20 or so clients are from the Gulf countries.

"This change came about thanks to the support my project receives from the mentors at UCAS. Providing our services through text messaging restricted our audience to inside the Gaza Strip, which could never be a stable market," El-Madani says.

Children play Awad's Smart Kit game

However, he faces other challenges, most notably the shortage of electricity crisis and the associated lack of a reliable internet connection. “Although the team for my project began with a lack of sufficient experience and we were not funded 100 percent, the siege is the only ongoing challenge we are not able to overcome. As a result, we are not yet successful. My goal is to achieve strong financial performance.”

Future Engineers Club

In 2017, the proposal for a Future Engineers Club was selected for support, along with 15 others out of 1,080 applicants, by the Business and Technology Incubator.

Abdul Rahman Awad, 24, graduated with a degree in mechatronics engineering (which combines a focus on electronics and mechanics). For two years while he was studying, Awad and his friends ran a summer camp of sorts, training children ages 6-15 in basic skills related to computer engineering and electronics. The opportunity to turn the camp into a business came in 2017, when BTI launched SEED2 to support and fund small projects.

BTI funded the school with $7,000 and continues to follow up with the team, providing mentoring by specialists from  Jordan and Gaza. Awad’s four-member team developed an educational game called Smart Kit; the plastic and magnetic pieces are produced by a local company and now sold in both Gaza and the West Bank.

"The siege was our motivation to 'think out of the box'," Awad says. 

Originally published in the Washington Report on Middle East Affairs.

Posted: February 20, 2019

Mentor: Pam Bailey

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