When Banks Say No, Israelis in Need Turn to Growing Nonprofit Option – The Forward


In the weeks leading up to Purim 2020, Evyatar Cohen built up his inventory at Kos Shel Bracha Wine Shop, his Jerusalem liquor store. Then COVID-19 hit. Many Israelis canceled Purim and Passover celebrations, Israel was under strict national lockdown.

Although the wine store is technically open under the Israeli government’s exemption for food and drink shops, “people were not in the streets, were not allowed to throw simchas and were nervous about finances, so don’t splurge on wine, even Friday night dinner, ”Cohen, a father of four, told The Forward.

Faced with the fall in sales, the wine merchant is worried. How was he going to pay his suppliers for inventory he couldn’t sell, and repay the money he borrowed from the bank to start his business?

To improve his cash flow, Cohen sought COVID help from the government, but was quickly turned down. Local banks, inundated with demands, were reluctant to extend credit.

“It was a bureaucratic nightmare,” Cohen said of his efforts to secure funding. “It took a month to fill out the papers and just a day to receive a refusal. “

When a financial advisor from MATI, a business development center, suggested he apply for a low-rate loan from the Ogen Group, he figured he had nothing to lose.

Following an extensive verification process that assessed Cohen’s ability to effectively run his business and repay a loan, Ogen granted Cohen a 5-year loan at 3% interest which he repays monthly.

“There was even a grace period,” Cohen said, still grateful over a year later. “These conditions made repayment of the loan very easy. “

Formerly known as the Israel Free Loan Association, the Ogen Group calls itself a nonprofit “social loan company” and operates much like the Hebrew free loan associations in the United States. loans to small businesses and non-profit organizations.

Founded by the late Eliezer Jaffe in 1990, IFLA operated under the halachic principle prescribed by the Torah: that a lender should not charge interest. Once repaid, the loans are recycled to new borrowers.

While interest-free loans are every borrower’s dream, IFLA officials a few years ago began looking for a way to increase the amount of capital they could lend and the impact they could have. to have. This involved adopting a new business model and looking beyond its traditional donor base.

“The classic model of philanthropy based on overseas donations is not sustainable,” said David Angel, vice president of partnerships for Ogen. “Organizations must modernize and diversify. Diaspora Jews who have traditionally supported Israeli causes with all their hearts are aging, and their children and grandchildren cannot be counted on to continue that support, he said.

In 2016, IFLA hired Sagi Balasha, a former economist in the Ministry of Finance, to be its CEO and restructure the organization. IFLA became known as the Ogen Group (in Hebrew, Ogen means “anchor”).

The new Ogen Group continued to offer interest-free loans and, in January 2020, established a social loan fund: a public utility (PBC) funded by Israeli and foreign donors and impact investors. It offers low interest loans to small businesses and non-profit organizations.

The timing couldn’t have been better.

“On March 15, we understood that we would be very busy,” Balasha said of Israel’s first wave of COVID. “For-profit lenders pulled out as small businesses, nonprofits and individuals faced unprecedented challenges. We also understood that our old model could not meet the challenge.

The Social Loan Fund has enabled Ogen to receive funds through “investments” – loans with a social purpose provided by philanthropists, foundations and investment funds, among others. Their money is used as a social safety net and then returned, plus a small amount of interest.

If you ask someone to lend $ 1 million with modest interest instead of giving $ 1 million, “it’s easier to raise capital,” Angel explained. “It gives us access to non-traditional philanthropic resources. “

The COVID crisis required another workaround. Instead of requiring borrowers to find guarantors, Ogen asked the philanthropic community to act as guarantors, in case troubled borrowers default.

“We have received tremendous help from philanthropists in Israel and abroad,” Balasha said. “These donors were our mitigating cushion. They have enabled us to provide riskier loans “to borrowers reeling from COVID losses.

Looking to the future, Ogen hopes to create a social bank that can borrow from the Bank of Israel. The more capital Ogen can access, the more loans it can provide, Balasha said.

Thanks to these new funding models, Ogen was able to lend around $ 1 million per week during the pandemic. Despite the COVID crisis, she managed to lend around $ 50 million in 2020, up from around $ 20 million in 2019.

Ogen is not the answer for all needy Israelis.

He turns down about 50% of the loan applications he receives “because [the applicants] would not be able to repay the loans, which would just plunge them into a bigger hole, ”Angel said.

However, if the organization believes the applicants have potential, Ogen provides them with a coach in the hope that they will either get on their feet or qualify for a loan in the future.

“While a loan can change a life, it can also be damaging,” Angel said.

Many approved applicants are mentored through Ogen-Keren-Shemesh, a network of 1,000 senior Israeli business leaders who offer their services to borrowers.

Debbie Gross, director of Tahel, the Crisis Center for Religious Women and Children in Jerusalem, said the mentorship she received was “invaluable.”

“Ogen provided me with two mentors. The former really helped me develop a project-based budget and taught me how to maintain staff morale. Another mentor helped the organization market its services and conferences online. It has been extremely helpful, ”she said.

Due to the pandemic, Gross had to lay off three of the centre’s nine employees and put three others on temporary unpaid leave.

The loan, which Tahel has since repaid, “helped us until we could reorganize and raise funds. It really saved us, ”Gross said.

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