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| Overview For Potential Funders
The Economic Context
Jerusalem has an overall city poverty rate of 40%. Contributing to this poverty is the low labour participation of 45% amongst the working age population. The communities with the highest rates of poverty are those of the Charedi Jews and the Palestinian Muslims, who together amount to two thirds of the total population of Jerusalem (total : 760,000 people). These communities have limited access to basic financial services, and their ability to improve their standard of living is often severely constrained.
The Need for Micro-finance
There is little or no access in the poorer sectors of Jerusalem to microfinance. A JIMF-commissioned study from the Near-East Foundation has confirmed the difficulty amongst would be entrepreneurs in obtaining access to working capital and start-up funding amongst the Palestinian community in East Jerusalem, and informal investigations have indicated similar difficulties in the charedi community.
Inter-Communal Tension
Beyond the economic need, JIMF is motivated by an awareness of growing inter-community suspicion and hatred, particularly amongst the more religious groups on both sides. Yet even members of each community who are mutually antagonistic (and see no merit in talk for its own sake) may nonetheless recognise the value of an economic project, and success would in time mitigate suspicion. Adopting a model that is compliant with religious law may help to emphasise the values shared by the two communities.
The Proposed Business Model
In light of the above, the Jerusalem Interest-free Microfinance Fund will target aspirant entrepreneurs and small businesses especially in the under-developed and under-funded Arab and charedi population segments. To achieve credibility with these communities, JIMF is determined to operate in ways that comply with Sharia and Halacha, avoiding the taking of interest. This approach will require innovation in the microfinance model (perhaps substituting equity finance for loan finance as businesses become more secure).
To achieve its economic and social purpose, it will be essential to keep defaults to the very low levels (less than five per cent) achieved by microfinance funds elsewhere through provision of business training to those who need it, rigorous screening of business proposals and through the establishment of credible but culturally sensitive enforcement mechanisms.
Required Funding
JIMF has received seed-corn funding from a family charitable Trust in the UK. It is now seeking funding partners from amongst all sections of the concerned international community to achieve an efficient scale of operation, which would allow it to support some NIS 2 million (c.US$570,000) of loans per annum, some 100 loans with average value of around NIS20,000, including NIS1-2,000 for business training where this is required, and an average duration of 42 months. Over the course of six years, a loan fund of some US$2.5 million would be built, which could be sustained thereafter with annual funding of around US$100,000, covering defaults and administration. Clearly, funding shortfall in the early years would slow the achievement of efficient scale; conversely, in due course, with equity investments, internally generated growth should be possible. If you have any further queries about donating, please complete the Contact Us form.
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