Interest-free lender gets regulator’s okay to expand activities

Ogen wins license to start providing low-interest loans to consumers who have been sidelined by traditional banking system

Shoshanna Solomon is The Times of Israel's Startups and Business reporter

The offices of Ogen, in Tel Aviv (Courtesy)
The offices of Ogen, in Tel Aviv (Courtesy)

Ogen, an Israeli nonprofit organization that provides interest-free credit to new immigrants and marginalized segments of society, has attained a license from the Israeli capital markets regulator to start providing low-interest loans to small businesses, first time home-buyers and NGOs.

The permit from the Capital Markets Authority is a step toward the organization becoming the nation’s first not-for-profit social bank, once the lender gets a further nod from the Bank of Israel. The newly set up Ogen — Social Loan Fund is a public benefit company wholly owned by its parent charity, Ogen – Free Loan Fund.

The lender will make available immediately NIS 135 million ($38.5 million) in initial capital to provide accessible low-interest credit to people who otherwise would likely not get access to funds, via traditional banking channels.

“Receiving our license from the Capital Markets Authority is an important milestone,” said Sagi Balasha, the CEO of Ogen, in a statement.

Ogen’s small business loans extend up to NIS 200,000 with a 5% fixed interest rate, secured by one guarantor. Ogen requires borrowers to present a professional business plan prepared by a business adviser.

Families purchasing their first home can be eligible to loans of up to NIS 100,000, at a 5% fixed interest. These loans are intended to help families pay a down payment on apartments of up to NIS 1.5 million in value. These loans are primarily given to families who have completed Ogen’s free “Ogen Labayit” coaching program, which helps disadvantaged families improve their finances and join the housing market.

Ogen will also provide low-interest bridge loans for nonprofit organizations and public benefit companies that provide services for the government, designed to help organizations experiencing cashflow challenges while waiting for government funding to arrive, the firm said in a statement.

Ogen, formerly known as the Israel Free Loan Association (IFLA), was founded by Prof. Eliezer Jaffe, an immigrant from the US. He set up the organization in the early 1990s when Israel was flooded by immigrants, mainly from the former Soviet Union and Ethiopia, and it quickly became a resource providing funds for low-income people.

Since its founding, Ogen, which means “anchor” in Hebrew, has provided more than $300 million in interest-free loans to over 60,000 low- and middle-income families and small businesses, with a default rate of less than 1%, according to the firm.

Ogen is now looking to diversify its activities, transforming itself from a nonprofit that provides interest-free credit to new immigrants and marginalized segments of society into a nonprofit impact-investment bank that provides low-interest credit to to the same demographic, thus serving more people.

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