Central bank launches plan for low-interest loans to help businesses survive war

The Bank of Israel on Monday introduced a program tailored to help small businesses survive during the ongoing war with the Hamas terror group by providing them with a lifeline for low-interest credit and loans.

As part of the plan, the central bank will provide Israeli banks with monetary loans of up to NIS 10 billion ($2.6 billion) for a period of two years at the Bank of Israel’s interest rate, which is at 4.75 percent minus 1.5 percentage points. The program will enable local banks to grant loans to war-affected small businesses at lower interest rates of about 3.25%, despite the risk inherent in providing credit to these businesses during this challenging period, the central bank said.

The credit program is intended to protect small businesses from the brink of collapse and help them survive the challenging war period until their operations return to full activity. It will be granted until the end of January 2024.

Bank of Israel Governor Amir Yaron said that the program is part of a range of policies that the central bank has implemented to help businesses deal with the economic hardship arising from the war.

“We will continue to respond to the various economic issues arising from the war and use various tools at our disposal if necessary,” Yaron stated.

War erupted in Israel after Hamas’s October 7 massacre, which saw about 3,000 armed terrorists burst across the border into southern communities in Israel from the Gaza Strip by land, air and sea, killing over 1,400 people, mostly civilians, including babies, children and the elderly. At least 240 people were abducted and remain hostage in Gaza.

Hamas and other terror groups have continued to rain rockets on Israeli towns and cities in the north and south of the country, displacing over 200,000 Israelis and causing widespread damage despite the cover provided by the Iron Dome missile defense shield. The ongoing barrages of rockets have left many businesses closed and schools shut.

Since the outbreak of the war, the Bank of Israel has taken a number of steps to ease and facilitate mortgage and loan repayments to help households and businesses cope with the financial burden.

Last month, the central bank asked the country’s lenders and credit card companies to provide some financial relief, in particular for households and businesses located near the Gaza Strip, and first-degree relatives of those killed or abducted.

As part of the relief package, homeowners who are among the designated groups are allowed to freeze their mortgage payments for a period of three months and bear no interest or other fee charges. The measure also includes a three-month deferral of repayments of consumer loans.

The Bank of Israel, which left borrowing costs steady at 4.75% on Oct. 23, has reiterated over the past weeks that its policy during the war is focusing on stabilizing the financial markets and reducing uncertainty, while hinting that an interest rate cut is less likely in coming weeks.