As part of a broader economic recovery program, the Jewish Federations of North America is launching a major new loan fund — so far $25 million has been allocated, with plans to raise $75 million more — to increase the ability of Israeli loan providers to help small businesses affected by the war in Gaza and fighting along the Israel’s northern border.

Jeff Schoenfeld, the co-chair of JFNA’s Israel Emergency Fund allocation committee and leader of this loan fund initiative, said the organization quickly realized that the Oct. 7 attacks and ensuing war would dramatically affect the businesses across the country and looked to find ways that philanthropy could help.

“In evacuated communities, obviously, business grinds to zero, but we were also hearing of situations across the country as reservists were being called up and their businesses were also being halted,” Schoenfeld told eJewishPhilanthropy.

“Through reports from the Bank of Israel, from the Taub Center [social policy think tank], from lots of anecdotal evidence, [we could see that] the Israeli economy is not functioning normally and that the greatest burden is falling on small and micro-businesses,” he said.

Schoenfeld, a partner and head of global institutional business development and relationship management at Brown Brothers Harriman & Co. — one of the largest private investment banks in the United States — was joined in this initiative by a number of other Jewish and Israeli financial experts. They include: Sir Ronald Mourad Cohen, a British venture capitalist; Rakefet Russak-Aminoach, the former CEO of Israel’s Leumi Bank; Uri Levin, the former CEO of Discount Bank; Laura Lauder, who runs the Lauder Family Venture Philanthropy Fund with her husband, Gary Lauder; Neil Wallack, JFNA board secretary and the former chair of Boston’s Combined Jewish Philanthropies; Michael Lustig, a former managing director at the asset management firm BlackRock; and Becky Caspi, the director of JFNA’s Israel office.

After speaking with relevant officials and experts in Israel, the team determined that one of the best ways for the organization to help was through no- and low-interest loans to these small businesses, which were not necessarily able to get loans from banks or government programs.

The JFNA team found that big banks were “risk averse by nature,” which made them less likely to issue loans to these struggling small businesses, and that the government had not yet stepped in to fill that gap, Schoenfeld said.

“Our experience so far has been that the government of Israel has not been able to mobilize itself yet for broad human service support,” he said. “There are still many questions about the role of government support prospectively in terms of the rebuilding, in terms of job training, in terms of trauma care, so philanthropy is filling in all the voids today, waiting for a comprehensive plan by government.”

Rather than lend the money itself, JFNA decided to work through the “extensive ecosystem of non-bank small business lenders” that already existed in Israel, Schoenfeld said. This includes both nonprofit lenders, such as Ogen, SparkIL, the Koret Israel Economic Development Funds and the Jewish Agency’s Daroma Tzafona, which specifically helps businesses in southern and northern Israel, as well as a number of for-profit companies, notably credit card companies.

JFNA has yet to allocate the money from the fund to specific lending platforms, but Schoenfeld said that it plans to do so in the coming days. Each of the platforms has carved out its own niche in the economy, and JFNA is working with them to determine the types of businesses and the types of business owners who should get support, while still leaving the decision ultimately up to the lender, Schoenfeld said.

“We are leaving that open to the platforms but with an understanding that they each have specialization in certain areas,” he said. 

SparkIL, for instance, has traditionally focused on businesses owned by people from more marginalized communities in Israel, such as Arab Israelis, Haredi women and people from the country’s geographic and social periphery. Ogen, which lends to individuals, small businesses and nonprofits, recently started a new loan program for senior reserve officers, guaranteeing them an initial loan of NIS 30,000 ($8,000) once they provide a minimum amount of documentation, with the potential to receive a full loan of NIS 300,000 ($80,000) once they provide additional information about their businesses.

The food security nonprofit Leket is starting a partnership with Ogen and the Koret Israel Economic Development Funds to provide loans specifically to Israeli farmers as the country’s agricultural industry has been particularly hard hit by the war, which has made some fields inaccessible for security reasons and driven away many of the foreign nationals who work as farmhands in Israel.

“We’re very conscious of supporting farmers, of supporting tech, of supporting Arab businesses, of supporting women-owned businesses. We want this to be a broad and comprehensive initiative for all who need credit,” Schoenfeld said.

JFNA has raised $768.5 million for its Israel Emergency Fund since Oct. 7 and allocated $282.7 million of it, including the $25 million toward this Israel Emergency Loan Fund. But Schoenfeld said the plan is to increase the loan fund to $100 million through further contributions from “across the federation system… as well as foundations and significant individual donors across the U.S. and Canada.”

Schoenfeld noted that this loan fund represents “philanthropic capital,” not an investment that will be returned (though the loans to the businesses will, of course, have to be paid back; they are not grants). That $100 million will go toward absorbing potential defaults and covering the costs of reduced interest rates. By having this philanthropic cushion, the small business lenders are able to secure their own loans from banks, allowing them to lend out far more money to small businesses.

Schoenfeld estimated that with $100 million of philanthropic capital, the lending platforms would be able to issue $400 million in small business loans. “Nothing anywhere close to this scale is going on in Israel right now,” he said.

In addition to encouraging foundations and donors to make philanthropic donations to the loan fund, Schoenfeld said he and JFNA were also pushing them to make “impact investments” in the form of loans — also referred to as “recoverable grants” — to boost the Israeli economy.

At the same time, Schoenfeld stressed that the loan fund and the encouragement of “recoverable grants” were not the only way that JFNA — and philanthropy more generally — planned to assist Israel in its economic recovery.

“The loan fund is a major part of the economic relief and resilience piece, but not exclusively,” he said. “We envision workforce development and retraining to also be a major component of the economic relief and resilience piece of our work.”