The Economic Context

   The  overall  poverty rate in Jerusalem stands now at nearly 40%, making it the  poorest  city  in  Israel  (Jerusalem Institute for Israeli Studies).
  Contributing  to poverty is the low labour participation of the working age population in Jerusalem: 45% (compared to 55% national average).
  Within Jerusalem, two communities stand out as being in particular need of support, both regarding their poverty and their alienation from the surrouding economy (and indeed from each other). The Ultra-orthodox  Jewish  (charedi)  and  Arab communities amount to two thirds  of  the  total  population  of the Capital (740,000); they have the highest  rates  of  poverty and very limited access to financing resources.  

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.


A full proposal for potential funders is available on request.
(Please email: info@jerusalemmicrofinance.com or complete the Contact Us form).