SAN FRANCISCO (j. the Jewish news weekly of Northern California) -- A program started by a San Francisco foundation soon will make it possible for struggling small businesses in Israel’s Negev to obtain the loans necessary to bolster their businesses, create jobs and boost the economy.
The venture is made possible from a partnership of the Koret Israel Economic Development Fund, an arm of the San Francisco-based Koret Foundation; Israel’s Bank Leumi; and the Overseas Private Investment Corp., a U.S. governmental agency.
OPIC, which fosters investment overseas and promotes economic development in new and emerging markets, and the Koret fund have provided the funding to guarantee any loan Bank Leumi directs to Israeli entrepreneurs in the Negev.
The collaboration will make available $160 million over seven years for loans ranging from $13,000 to $325,000.
“At the outset of our program years ago, we set out to prove that small business lending was not necessarily risky business,” said Jeff Farber, CEO and executive director of the Koret Foundation.
“We didn’t start this program to be recognized by the U.S. government or the president of Israel, but having gotten this kind of recognition is really a milestone for this little program started by the Koret Foundation.”
The fund, which is the largest of its kind in Israel’s history, will enable small-business owners in the Negev to receive loans at a 1.5 percent interest rate. The cooperation among the agencies will allow businesses that meet the criteria to offer up much less equity than is usually demanded when applying for credit.
Most of these businesses otherwise would not be eligible for a loan, Farber said.
“Maybe they have no collateral, they’re too young or they have no track record,” he said. “Were it not for Koret’s dollars guaranteeing a portion of the loan, the bank wouldn’t risk making the loan.”
The Koret fund also helps small-business owners develop a business plan and draft a loan application, so that they are more prepared and a stronger loan candidate when they appear at the bank.
Loan recipients include Israelis, Bedouins and Arab Israelis, said Abe Sofaer, president of the American Friends of the Koret Israel Economic Development Fund and a fellow at Stanford University’s Hoover Institution.
On visits to Israel, Sofaer has met some of the loan recipients, including the owners of a computer repair store, a pizza parlor and a jewelry store. He is excited to see how the latest loan program impacts life in the Negev.
“The lending culture in Israel has changed a great deal because the banks can see that what we do is a financially sound way to go about creating economic activity,” Sofaer said.
When Koret started its Israel Economic Development Fund in 1994, it approved 14 loan applications; in 2009 the number was 1,500.
Since its inception, the fund has administered 8,000 small- and micro-business loans totaling $220 million, which has created and supported 40,000 new jobs in Israel.
“Creating jobs and enabling people to recognize their own self-worth by running a business is really important,” Farber said.