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This article appeared in Israel's Globes magazine and is reprinted with permission.
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By Laura Goldman
Looking at old pictures from the seventies and seeing family and friends dressed in California leisure suits, I used to poke fun at how ridiculous they looked. Not any more. I recently discovered that the sale of those leisure suits (apparently a huge quantity of them) funded an innovative foundation that is reinventing Jewish philanthropy.
Koret Israel Economic Development Funds (KIEDF), managed in Israel by former attorney and investment banker Carl Kaplan, pioneered philanthropy for economic development by using a portion of the Koret Foundation’s endowment to fund small-business lending programs coupled with innovative plans for micro lending.
In 2006, micro credit pioneer Muhammed Yunus won the Nobel Prize for Peace, validating the concept. In brief, the aim of micro credit is to create self-sufficiency. “Give a man a fish and he eats for one day,” the saying goes. “Teach that man to fish and he eats for a life time.”
According to its website, Koret Israel Economic Development Funds (www.kiedf.org) has grown to become the state’s dominant private-sector, small-business development program. Its focus on the small-business sector has successfully channeled more than $160 million in bank financing to create jobs, bringing self-sufficiency and dignity to thousands of Israeli business owners and their employees.
The business-lending program that Kaplan has established passed my rather tough inspection. Best of all, it bypasses our sometimes inefficient (Israeli) government and works directly with the private sector.
Since it only guarantees part of the loans, KIEDF is able to leverage its assets . Koret works in conjunction with Bank Otzar Hachayal, which provides the bulk of the loans, and with Bank Hapoalim for its micro finance programs. Koret will also help applicants secure small-business financing from other sources if they are eligible.
The first step for loan applicants is to prepare a business plan with the help of one of the financial consultants chosen by KIEDF . Since the business consultant wants repeat business, Koret presumes that he will give an accurate assessment of the future of the business. Loan applicants pay the consultant only if their loans are funded.
Many of those seeking loans balk at paying for a business plan. But the Koret approach is the right one. Would you build a house without architectural plans or set broken bones without an x-ray? The numbers speak for themselves. The combined default rate of the more than 3,500 small-business loans initiated by Koret since 1994 is less than 2 percent. Most bankers do not allow themselves to dream of such low default rates.
Koret stipulates that the loans can not be used for just any purpose. For example, they can not be used to purchase real estate, but they can be used to renovate building space for their own purposes, or buy trucks and supplies for a plumbing business, for example.
Koret loan programs are available to all sectors of the Israeli economy. Micro loans of up to $5,000 dollars are funded for home-based businesses.
The Bedouins and the Arab sectors are also included. The unique characteristics of their individual cultures are taken into consideration. Since most Bedouin women are forbidden from working outside the home, Kaplan recounted an example of a Bedouin woman who was loaned money to buy a sheep to fatten for slaughter. She then sold the sheep for a profit and bought two more sheep.
A collective of Arab women were able to pool their micro loans to rent a field to grow crops. Another Arab woman used her loan to establish the first day care center for Arab toddlers in Acco.
Incredibly, Kaplan has been able to persuade Israeli banks to do the right thing. Previously, all the banks in Israel preferred to lend to millionaires with the last name Dankner or Tshuva, and basically ignored small- business owners. The success and winning formula of the Koret program has convinced bankers not only to accept applications that come their way, but even to advertise for more. Kaplan has also been able to loosen up endowment money that has been lying dormant for years.
As great a job as Kaplan is doing, I challenge the Koret Foundation to take its micro lending program one step further. The idea for the expansion literally came to me in the mail. As part of my year-end bonus, one of the companies that I work for sent me a gift certificate to Kiva (www.kiva.org.) When I opened the envelope, I groaned. “Just what I need,” I thought. “More clothes.”
Imagine my surprise when I went to the Kiva website and saw that it is an Internet micro loan center. With several other Kiva members, I loaned $25 of my bonus gift certificate to a woman in Nigeria so that she could buy a sewing machine to expand her garment business. It would be great if Koret could join this program or start a similar one. (KIEDF is awaiting approval to become the Kiva connection for Israel).
KIEDF should be the first stop for philanthropists seeking a sound investment in economic development, and for any Israeli entrepreneur looking to launch or expand his business.
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Food Under Fire: Tomer and his team keep the pizza ovens warm, home-delivering for Sderot residents at a discount even as the rockets fall. |
