The Israel Free Loan Association, based on a Jewish concept endorsed by the sage Maimonides, offers Israel’s working poor interest-free loans.
Like many other Ethiopian immigrants, Gigno Beyenah is still having trouble making ends meet 11 years after arriving in Israel. As a court warden, the father of two earns minimum wage, which adds up to about NIS 3,800 ($1,000) a month. Two years ago he bought his first apartment, in Jerusalem’s Armon Hanatziv neighborhood. The trouble was that he couldn’t afford to pay his mortgage.
Then a friend told him about the Israel Free Loan Association (IFLA), a Jerusalem-based non-profit organization that offers interest-free loans to the working poor. Last year he turned to the IFLA for a loan to help pay his mortgage: “I’m paying off the bank over 30 years. Without this loan I could have defaulted. It didn’t solve all my problems, but it certainly relieved the immediate worry,” Beyenah tells ISRAEL21c.
The IFLA, which purports to be the largest organization of its kind in the world, offers interest-free loans of between $3,000 and $5,000 to individuals and $25,000 for small businesses. Applicants must earn an average monthly income of at least NIS 3,000 (about $730), and have two guarantors.
Those earning more than NIS 15,000 (about $3,500) a month are not eligible for a loan. Most of the IFLA’s clients don’t qualify for bank loans, and would otherwise be forced to turn to the gray market (high compound interest) or the black market (criminal loan sharks).
A non-profit bank
At the IFLA’s pleasant and spotless headquarters in Jerusalem’s Talpiot neighborhood (not far from Beyenah’s apartment) potential borrowers calmly discuss their loan options with trained personnel.
“It operates like a bank,” says Yehezkel Laing, PR director of the IFLA. “I call it a non-profit bank.”
“These people are not looking for charity,” Professor Eliezer Jaffe, the 76-year-old founder and driving force behind the organization, tells ISRAEL21c. “We treat them as clients. We’re trying to keep them out of the jaws of the loan sharks.”
In the 20 years since its inception, the IFLA has loaned out more than $115 million to over 50,000 low-income families and struggling small businesses. On average, the IFLA lends out another $15 million every year to Israelis of all backgrounds.
“The organization has really taken off in the past 10 years,” says Laing. “It is doing amazing work. While most charities in Israel are giving handouts and grants, the concept of interest-free loans keeps the receiver independent of aid, rather than dependent on it. We are dealing with a renewable resource – the same dollar can go around 10 times. On average, that dollar is loaned out again every three years.”
A Jewish tradition
Interest-free micro lending, the current bon ton of macro-economists worldwide, has actually been a Jewish expertise for centuries. The great Jewish sage Maimonides (Rambam) wrote that a loan is better than charity, as it enables people to help themselves.
And like the Hebrew Free Loan Associations that sprung up in cities across the United States in the early 20th century, the IFLA helps new immigrants in Israel to get a better start. IFLA loans have enabled new immigrants to buy apartments, university students to complete their academic degrees, ailing Israelis to undergo operations, handicapped people to purchase medical equipment, and have helped struggling small businesses to get back on their financial feet.
“The difference between us and micro-lending is that we charge no interest. That is a strong principle for us – even in the very few court cases [for defaulting], when the judges ruled that beyond the fees, we should receive interest on that sum, we turned it down and refused to take the interest,” says Jaffe.
Founded in 1990 with an initial donation of $20,000, the IFLA has a current fund base of $35 million that has been loaned out three times over, and counting. In December, the IFLA celebrated a milestone by surpassing $100 million in interest-free loans granted.
The organization has received numerous prestigious awards, including the President of Israel’s Award for Outstanding Volunteer Organization, the Ministry of Immigrant Absorption’s Award for Assistance to Immigrants, the Mayor of Jerusalem’s Citation for Outstanding Non-Profit Activity and the Sderot Conference Award for Contribution to Israeli Society.
“This is a concept that other nations could benefit from – just like other countries have copied the Yad Sarah model,” says Laing, referring to Israel’s largest volunteer organization, which aids disabled, elderly and housebound people by loaning them medical and rehabilitative home-care equipment.
From new immigrants to natives
The IFLA has branched out over the years to offer help not just to new immigrants, but to Israelis of all backgrounds, especially those starting small businesses.
Meir Charbit is a Jerusalem taxi driver, a father of three who earns NIS 6-7,000 a month. When he came in recently with a specific problem, he was already familiar with the IFLA, having taken out a small loan several years ago. “They really are angels,” he says of the organization’s staff. “I don’t know what I would have done without them. The money they lent me was a real help.”
Like many working-class Israelis, Charbit found himself in a situation where he simply couldn’t make ends meet. “I’d run up a bank debt, and was paying lots of interest on it,” he says. “The banks set high rates – when you really need them they hit you with interest that you can’t afford. The banks are slaughtering us.”
Charbit is determined to repay the IFLA loan, come what may. “If the world turns upside down, I’ll still do everything in my power to pay them back. They gave with all their heart, and I appreciate that.”
The IFLA’s capital comes from charitable foundations, funds and private donors. “We maintain low overheads,” Jaffe points out. “What we don’t want to do is sit on money. Almost one-third of our loans are for opening, bolstering or saving small businesses [with sums of up to NIS 90,000, some $25,000]. The banks want to go with the big businesses, but we see small businesses as the backbone of the economy.”
Immigrating to Israel in 1960, Jaffe over his 45-year career has become one of Israel’s foremost experts in social work and philanthropy. Now retired from academia, the Cleveland native co-chairs the Center for the Study of Philanthropy in Israel at the Hebrew University of Jerusalem. “Philanthropy is not a subject that had been thoroughly researched in the past,” he notes, adding, “Most of my free time goes to the IFLA.”
The economic crisis has drastically increased the IFLA’s target population, with the working poor now comprising almost 50 percent of Israel’s destitute. In February, the organization ran a 12-day radio campaign, with brief slots five times a day on local radio stations around the country.
“The feedback was tremendous,” says Jaffe, with obvious excitement. “Before the campaign we were giving out 350 loans a months – as a result of the campaign, we sent out 3,000 loan application forms. About 60-70 percent of those applicants will receive a loan.”
Activities at the IFLA are expanding rapidly as more people hear about its work, and still, “there’s a need out there that we haven’t even touched yet,” Jaffe concludes.