Ogen: The New Way to Invest in Israel
By Ari H. Jaffe
A thirty-year-old organization has reinvented itself to provide credit to Israelis during the COVID crisis
When my uncle, Professor Eliezer Jaffe z”l, made Aliyah in 1960, he set out to protect the most vulnerable members of Israeli society. At Jerusalem’s Hebrew University, where he helped to fund Israel’s first academic school of social work and ultimately held the first chair in philanthropy at any university in the world. He guided American philanthropists in supporting the young Jewish state by publishing Giving Wisely: A Guide to Nonprofits in Israel – the very first resource of its kind.
Having literally written the book on Israeli philanthropy, Dr. Jaffe saw the need to provide interest-free loans to over a million immigrants from the Soviet Union and Ethiopia who lacked the family capital to establish themselves financially in Israel. His most enduring accomplishment was founding the Israel Free Loan Association (IFLA) in 1990. Today, IFLA has transformed and blossomed into the Ogen Group, which will soon become Israel’s first social bank. Over the course of its history, Ogen has lent almost $400 million to tens of thousands of Israelis across religious and political spectrums – as well as businesses and nonprofits throughout the country – with a default rate of just 0.7%.
Late 2019, the Ogen Group expanded its services by offering loans with minimal interest to small businesses and nonprofits. It also moved one step closer to becoming a full-fledged social bank that puts customers before profits. This is the realization of my uncle’s dream, a project he fully committed to for the last few months of his life. The idea was simple but brilliant. Ogen would raise funds from impact investors, lend out the money to small businesses and nonprofits in Israel, and then return it with minimal interest. Innovation would allow Ogen to grow its resources substantially to help a far larger number of borrowers. Concurrently, Ogen would continue working with charitable donors to fund interest-free loans to individuals. This new model for Israel would enable philanthropic investors to “have their cake and share it” through a credit vehicle licensed by the Israeli Capital Markets Authority.
Then, COVID-19 hit.
Without warning, in 2020 1 million Israelis became unemployed, furloughed, or had their hours slashed. Families, businesses and nonprofits struggled to survive. Demand for emergency loans ballooned. Since the outbreak of the crisis, with resilient staff and generous financial supporters, Ogen has lent more than $35 million – more than double the previous year. Recognizing Ogen’s growth and rapid response to the crisis, the Israeli government even took the unprecedented step of providing government loan loss guarantees.
Thanks to the generosity of our donors and investors and the win-win nature of our enterprise, Ogen has managed to greatly impact Israeli society at one of the most challenging economic times in history. The demand increases by the day, with more hardworking Israelis in need of the helping hand that Ogen provides.
While Ogen welcomes broad support from the American philanthropic community, I believe that impact investment is among the best vehicles for foundations and private philanthropists to leverage their resources and effect financial change in Israel. Foundations that are required to distribute 5% of their assets every year, can invest that money through ultra-low-risk loans, that are repaid and reloaned using those same dollars in the future. An impact investment in Ogen qualifies as a Program-Related Investment (PRI), a valid loan or investment for philanthropic capital – and offers a full return on principal plus a modest return and loan guarantees provided by the Israeli government.
For me, it is an honor and a privilege to pay tribute to my Uncle Eliezer Jaffe’s work by being a part of Ogen as it continues to expand access to credit to the Israelis who need it most.
The American Jewish community has a responsibility to support the most vulnerable segments of Israeli society, now more than ever. Impact investments in Ogen represent a low-cost, low-risk, efficient, and proven method of accomplishing this goal. I truly believe that this is the best new way to invest in Israel as its citizens and its economy recover from an extraordinary crisis.