Israel’s Third Sector – From Crisis to Independence

excerpts from a communique by Prof. Hillel Schmid and Avishag Rudich

Israel’s third sector is a key player in the economy, numbering some 25,000 organizations and pay-rolling some 17.5% of salaried workers.

In the past year the sector has been coping with a severe crisis, possibly the worst in its history. Some people actually argue that the sector is facing collapse, in a way that will affect the greater part of society in Israel. A survey conducted by the Ben Gurion University of the Negev argues that the robustness and stability of the third sector are at risk. In 2008, about one half of non profit organizations experienced an increase in expenses and a decrease in income compared to the preceding year, while, at the same time, some 4000 are at risk of closure. This crisis derives from the combination of a number of blows that have been inflicted on the sector.

• The first was the ongoing erosion of the dollar…
• The global financial crisis of mid-2008…reduced the profits of foundations from their investments…
• Added to this is the Madoff scam…

However, to blame the external environment would be to distort the picture. The non-profits themselves notably bear responsibility for their own position. This is because of how they choose to deal with the various difficulties, but is mainly ascribable to structural problems in the sector. The fact that nonprofit organizations are so heavily dependent on the Government and on public philanthropy confronts them with risks invited by the market or the political environment…

The current crisis should be utilized as an opportunity for restructuring Israel’s third sector and curing it of its structural and administrative ills, while enabling a strong civil society to be built in Israel.

Likewise, the sector must adopt efficient administrative patterns, must create alliances amongst its member organizations and must work to reduce unhealthy proliferation and duplication. In its present condition, Israel’s third sector is to large. Joint ventures and alliances will enable overheads to be reduced and the system to be rationalized. [emphasis eJP]

Professor Hillel Schmid is director and Ms. Avishag Rudich deputy director of the Center for the Study of Philanthropy in Israel, The Paul Baerwald School of Social Work and Social Welfare at Hebrew University. Posted with permission of the authors. The complete text is not currently available online.