Study on the Adequacy of the Accounting Profession in Meeting the Needs of the Palestinian MSME Market


Financial Management Specialist,

MENA Financial Management Unit,

The World Bank


The accounting profession is well respected in the West Bank and Gaza. Students choose to major in accounting given the general perception that there is a job market for them after graduation. There are approximately 2,000 accounting graduates per year (According to the Ministry of Higher Education, 2,122 students graduated in accounting in the 2013-2014 academic year). According to the latest labor force survey conducted by the Palestinian Central Bureau of Statistics (PCBS) in 2012, there are 1,200 auditors and 11,300 accountants in the country. Accountants work in a variety of industries as general accountants and bookkeepers, and others receive higher certification and pursue careers as auditors. After doing preliminary research on the accounting profession, certain knowledge gaps became evident. While the number of auditors and accountants has been quantified, the type of accountants (education level, skills, and so on) remains unknown. Further, it is not known what the MSME market requires, and whether there are potential areas that are not being met by the accountants currently practicing in the market.

The World Bank’s Engagement

MNAFM hired a consultancy firm, Solutions for Development Consulting Company, to conduct a study during the second quarter of 2014.  The goal was to analyze the main financial management needs of MSMEs against the adequacy, quantity and quality of accountancy professionals available to meet those needs. Special emphasis was placed on the adequacy of Small and Medium Practices (SMPs) and accountancy professionals and technicians (for example, bookkeepers) to meet the needs of the MSME sector. The purpose was to identify crucial financial management gaps in MSMEs and in the accountancy profession’s education, skills and offerings. In this way, future World Bank programs and activities can then direct and target these areas.

MSME Financial Management Needs

A large-scale survey was conducted among MSMEs to define their financial management needs. It was determined that a sample size of 600 MSMEs was needed to statistically represent the 123,558 MSMEs in the country. The classification of MSMEs varies widely in the country. The definition used by the survey was from the Ministry of National Economy: two or more of the following criteria must be applicable. These MSMEs were disaggregated into geographical regions as well as type of locality (for example, city, village or refugee camp), in order to get the broadest range of responses.


Table 1: MSMEs Classification Criteria






Number of employees





Annual turnover (US$)

Up to 20,000


200,001- 500,000


Registered capital (US$)

Up to 5,000




Source: Palestinian Ministry of National Economy.


Table 2: Sample Distribution


Number of Operating Establish-ments







Refugee Camp


West Bank








Gaza Strip
















The surveys were completed in the field conducting one-on-one interviews. MSMEs were asked a variety of questions regarding whether they utilize accounting services. Specific questions were also posed regarding bookkeeping, tax, audit and advisory services.  There was a small group of MSMEs that did not use any accounting services; in this case, they were asked questions regarding their reasons, their perception of accounting and other factors that may have led them to not utilize accounting services.  Questions were also posed regarding potential areas of need.

Bookkeeping: Regarding bookkeeping services, the vast majority of MSMEs do have some accounting records (94 percent). Of the 6 percent that do not perform any bookkeeping, 44 percent are not registered enterprises. When asked who performed the bookkeeping of the 94 percent of enterprises that do have some form of bookkeeping, the replies can be categorized as in Figure 2. As Figure 2 illustrates, there is a large untapped potential for SMPs to provide bookkeeping services for MSMEs. Almost 70 percent of MSME bookkeeping is personally prepared by the owner. Accounting standards are another area of weakness in the preparation of financial reports. Most MSMEs do not utilize any standards in the preparation of financial reports (91 percent). Most reports are used for internal purposes only (65 percent), whereas only 19 percent use bookkeeping to access finance.

Taxation Services: Tax report preparation is different from bookkeeping in that most tax reports are prepared either by an accountant within the MSME or by an external office (63 percent), whereas only 33 percent are prepared personally by the owner. Almost 44 percent of MSMEs stated that they do get tax inspector visits.  However, 87 percent stated that the tax inspectors do not normally change the amount due.

Audit Services: Only 7 percent of MSMEs have auditing services.  Having auditors is highly correlated with the size of the enterprise, with 47 percent of medium-sized enterprises having auditors, 16 percent of small-sized enterprises and 4 percent of micro-sized enterprises. Of those that had auditing services, when asked why they have auditing services, 86 percent of them noted it was for internal purposes and that is was not legally mandated.

Advisory Services: The study found that advisory services are only requested by 4 percent of MSMEs. Again, it was correlated with the size of the enterprise, with larger firms more likely to request advisory services. The most requested services are market or feasibility studies, which donors or the banks have required from enterprises for the purpose of accessing finance. A majority of MSMEs stated that they did not see value in advisory services.


Quantity and Quality of Accountants in the Current Market

Quantity of Professional Accountants: As noted, the number of accounting graduates has increased in recent years as accounting is seen as a well-respected profession with high employment potential. In the last 10 years, the number of accounting graduates has increased about 62 percent in a year-on-year comparison. Also notably, accounting diplomas (two-year degrees), have increased significantly in the last 10 years. While the numbers remain small, the increase from 2003 to 2013 is about 60 percent year-on-year.

Quality of Professional Accountants: A smaller survey was conducted among professional accountants and auditors, and found that over 95 percent of respondents stated that they have a higher degree (Bachelors, Masters or PhD). Among the auditors surveyed, 40 percent stated that they have additional certifications. The average number of continuous professional education among those surveyed was 46 per cent. When asked about the main issues of concern to the accounting profession, those surveyed noted a lack of practical training, a lack of standards, a lack of regulation and control, low income as a profession, and no awareness by MSMEs regarding the importance of financial information. Most of those surveyed indicated that there is an oversupply of accountants in the West Bank and Gaza.  However, they also noted that there is an undersupply of specialized accountants, such as managerial accountants, fraud auditors, cost accountants, Islamic finance accountants, and others.

Conclusions and Recommendations:  There is sufficient quantity of accounting professionals to meet MSME needs. However, there is a demand for specialized accounting professionals which is not currently being met by the accounting profession. There is interest among MSMEs in accounting services, a market that SMPs can potentially serve. Areas of possible future work include the support and strengthening of SMPs, including raising awareness of opportunities by SMPs and ensuring that they offer the appropriate services for MSMEs. There also needs to be a strengthening of national legislation around accounting standards, with efforts to ensure that enterprises adhere to them.