Micro-Loans In Israel


Andrea Kruchik Krell became a believer in microfinance at the tender age of 5.

As a little girl growing up in Uruguay, she once visited a neighborhood grocery shop where a poor boy approached her. “Can you buy me candies?” he asked.

With the little pocket money she had, she bought him a few treats. Instead of thanking her, he asked her to buy him more. She had used up all of her coins, so she said no. He kicked her and ran away.

“When you give and just give, people don’t appreciate and their situation doesn’t improve,” she says.

At the time, Krell might not have used the word “microfinance” — a term used to describe the empowerment of the poor by providing small loans, typically used to start a business, in lieu of doling out alms. But a few years ago, the 24-year-old launched Microfy, a microfinance project that provides small loans to Sudanese refugees living in Israel, primarily in Tel Aviv.

The loans are used to purchase supplies to make jewelry, handbags and other handicrafts, which for a time were sold out of a small store on Dizengoff Street. Another micro-grant was given to a Darfuri woman named Fathyia, who opened a restaurant serving Sudanese refugees.

More recently, Krell has partnered with the Micro-Credit Clinic at Tel Aviv University and Supportive Community, an NGO that helps Israeli women become entrepreneurs, to teach business skills and provide micro-loans to refugees from the Congo, many of whom came to Israel with a higher level of education and skills than the Sudanese refugees. She regularly meets with a group of 15 women who are learning to speak English and Hebrew. Along with the help of business students at Tel Aviv University, she provides business coaching, which includes teaching refugees about Israeli taxes and other legalities and helping them craft a sound business plan.

Three students — Ilga, Faida and Gina— started a kindergarten and are poised to receive a $1,000 loan, which will allow them to move to bigger premises and expand the business.

Krell is one of several players in the small yet growing microfinance initiatives focused on improving the economic situation of underserved communities in Israel and the West Bank. Popularized in recent years by Bangladeshi economist Muhammed Yunus’ 2006 Nobel Peace Prize for founding Grameen Bank, micro-loans now serve more than 80 million people in developing countries. While microfinance has long been considered an effective way to lift people out of poverty in third-world countries, the same principles are now being applied in developed countries, too. These efforts often target less-advantaged populations within the larger society, particularly those with little access to banks or those who may not qualify for a standard business loan.

Microfinance is particularly apropos in Israel, a country in which a quarter of its population is living at or below the poverty level, says Dina Weinstein, executive director of PlaNet Finance Israel. PlaNet Finance Group, an international nonprofit that provides technical assistance to microfinance institutions in more than 60 countries, opened its Israeli branch in 2007.

In Israel, “the gap is huge and the demand is very big,” says Weinstein. “Israelis assume that every Israeli has a bank account and access to funds, but we’ve seen that this is not the case.”

Microfinance initiatives have started to grow in popularity in Israel partly due to the increased recognition that Israel has a poverty problem. “Before, Israelis were ashamed to say we have a poverty issue,” she says. “They want Israel to be recognized as a fast-developing country with a booming high-tech industry. The first step to solving a problem is recognizing that you have a problem.”

Many of the microfinance initiatives in Israel aren’t microfinance in the classical sense, since a $50 or $100 loan wouldn’t go very far. Still, in underserved communities that lack access to credit from banks — including the Bedouin, Israeli Arab and fervently Orthodox communities — a loan of a few thousand dollars can make a real difference.

Asyah, a 31-year-old mother of eight from Rahat, a Bedouin city near Beersheva, is living proof of why microfinance holds such appeal. She was married at the age of 14 and after years of abuse, she divorced her husband. Her home was demolished since she was unable to attain the necessary building permits and, as a result of her homeless status, social services took away her children.

Asyah’s life took a turn for the better when she approached the Koret Israel Economic Development Fund (KIEDF), Israel’s most established microfinance program. Through KIEDF’s SAWA – Direct Lending Microfinance Program, Asyah received a modest loan and business training and began selling Bedouin pita bread. She hopes to soon open a traditional Bedouin restaurant, which would grant her the income necessary to support her children.

SAWA is one of the few programs in Israel providing direct, non-bank micro-loans of between $500 and $2,500. In the four years the program has been in existence, it has provided more than 1,100 loans totaling nearly $1.2 million. The program’s success may be attributed to its requirement that micro-loan recipients form “solidarity groups” of five women each. The groups meet regularly to discuss business development issues, monitor loan repayment and address basic needs of the participants, including women’s rights, health, education and family planning.


With the advent of online micro-giving sites like www.kiva.org and a desire to earn a “double bottom line” on one’s dollars, now even those who are hundreds of miles away can lend small sums to micro-entrepreneurs living in the Middle East. One such initiative is www.LendForPeace.org, a Web portal that allows individuals to loan as little as $25 to Palestinian entrepreneurs living in the West Bank who have been vetted by U.S. government-approved microfinance institutions.

The microfinance platform is the brainchild of Sam Adelsberg, a senior at the University of Pennsylvania who grew up in an Orthodox home in Brooklyn and spent a summer interning at Planet Finance working on a microfinance feasibility study. Adelsberg strongly believes that an overlooked key to resolving the Israeli-Palestinian conflict is to promote economic opportunity among Palestinians living in the West Bank. Since February 2009, when Adelsberg launched LendForPeace along with a fellow Jew and two Palestinians, the site has doled out more than 45 loans at an average size of $800 each. The premise is to promote peace through prosperity — one $25 loan at a time.

“As a Zionist and as an Orthodox Jew, I don’t think this is a zero sum game,” Adelsberg says. “If there’s ever going to be a solution to this conflict, it’ll be when we’re both in better economic positions.”

Adelsberg is not the only one who envisions microfinance as a tool to achieve not only economic stability but also peace. In February 2009, a Jewish economist from London named Donald Franklin co-founded the Jerusalem Interest-free Microfinance Fund (JIMF). JIMF’s pilot program brought together two parallel groups of religious Arabs from east Jerusalem and haredi Jews; the two communities have among the highest rates of poverty within Jerusalem and very limited access to capital.

Each cohort was offered training and assistance in creating a business plan. Those who went through the program were then eligible for nearly $5,000 in interest-free loans to jumpstart their businesses. The loans are offered interest-free to comply with religious restrictions against the charging of interest.

“There’s a mutual sense of victimhood,” says Franklin, adding that “there’s surprise within the Muslim community that there is poverty on the other side.” While it’s too early to tell whether the venture has been a success — both in launching new businesses to alleviate poverty and fostering goodwill between the two groups — Franklin says that he is optimistic. “Even if there’s a little more mutual recognition and a little less hatred and misunderstanding by having a few more people get to know somebody on the other side,” he says, “a long-term solution emerges easier to reach.” n

Email: Tamar@jewishweek.org

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