Nonprofit Ogen lends record $50 million to ease small business cash squeeze
Ogen Group hopes to become Israel’s first social bank, as pandemic highlights how traditional lenders prefer bigger, less risky businesses over small enterprises
Shoshanna Solomon was The Times of Israel's Startups and Business reporter
The nonprofit Ogen Group lent a record $50 million to individuals, families, nonprofit organizations and businesses across Israel in 2020, as the pandemic wreaked havoc on the economy, shutting down businesses and putting over a million people out of work at its peak.
With unemployment soaring and small businesses and nonprofits in deep financial crisis, the government set up fast-track loans programs for those hardest-hit by the COVID-19 crisis. But small businesses suffered from a credit squeeze as banks refrained from lending to them, deeming them too risky. This created fertile ground for Ogen, which aims to become the nation’s first nonprofit social bank, to expand its activities.
$28 million of the total was lent out by Ogen’s Social Loan Fund, a new impact investment fund to support small businesses and nonprofit organizations — more than $10 million more than initially planned. The fund, which is licensed under Israel’s Capital Markets Authority, became in August the first nonprofit impact-investment fund in Israel to receive government guarantees on its loans, against a backdrop of criticism from the small business community about insufficient government support.
The fund enables impact investors to deposit money with Ogen. The money is then loaned out to businesses and nonprofits, with the aim of yielding a modest interest to investors.
According to a report by the Finance Ministry, small businesses are still struggling to get loans via the banks. According to the data, Ogen said in a statement, businesses that generate up to NIS 10 million ($3.1 million) in revenue, “which are the beating heart of Israel’s workforce and generate more than 35% of GDP,” actually received 0.6% less bank credit in the last three months of 2020 as compared to 2019.
Formerly known as the Israel Free Loan Association (IFLA), Ogen was founded in the early 1990s by the late Eliezer Jaffe, an immigrant from the US. The nonprofit provides both interest-free and low-interest loans, as well as financial guidance, to people, small businesses and nonprofits in Israel that are ill-served by the financial sector, which sees them as too small and too risky to get financing.
Ogen’s total lending for the year more than doubled what the organization lent in 2019 and reflects the highest amount since Ogen was founded, the company said in the statement. To meet the “immense demand” for loans, Ogen was able to raise more than $45 million in capital from donors and impact investors during the course of the year, the statement added.
Ogen has provided to date close to $400 million in loans to more than 66,000 Israelis over the course of its 30 years of activity, with a loan default rate of just 0.7%, the statement said.
This growth brings Ogen closer to becoming Israel’s first nonprofit social bank, which it hopes to do this year, the statement said.
“This has been an extremely challenging financial year worldwide,” said Sagi Balasha, CEO of the Ogen Group. “With the help of our investors and supporters Ogen was able to lend a record $50 million to those hardest hit by the crisis.”
He added that he hopes that during the new year Israel will see the opening of its first social bank, which will put “people before profits.”
“We have a responsibility to support the most vulnerable segments of Israeli society, now more than ever,” said Ari Jaffe, president of American Friends of Ogen, in the statement. “Impact investments in Ogen represent a low-cost, low-risk, efficient, and proven method of accomplishing this goal.”
