Community Report - Koret Foundation

American Friends of Koret Israel
Economic Development Funds
Supporting Small Business in Israel
KIEDF Koret Fellows
KIEDF Microenterprise Initiative
KIEDF Israeli Arab Loan Fund
KIEDF Small-Business Loan Fund
Community Report
FRO M T H E P R E S I D E N T
AFKIEDF supports the innovative work of Koret Israel Economic
Development Funds (KIEDF) — through strategic fundraising, advocacy,
and planning — advancing one of the Koret Foundation’s most effective
initiatives to date.
Since its modest inception in 1994, KIEDF has successfully facilitated more
than $100 million of leveraged financing to create and support employment
opportunity, self-sufficiency, and dignity for more than 3,000 Israeli small
and micro-business owners, their employees, and their families. As Israel’s
dominant private-sector, small-business development program, KIEDF
was the model for the Israeli government’s small-business loan program
launched in 2003.
AKIEDF Board of Directors
Abraham D. Sofaer,
President
Marc Abramowitz
Isaac Applbaum
Michael J. Boskin
Jeffrey A. Farber
Anita Friedman
Robert Friend
Stephen M. Grand
William J. Lowenberg
Bernard Osher
Alvin Rabushka
Tad Taube
Ernest Weiner
Claudia J. Hardin,
Secretary-Treasurer
Having learned firsthand the challenges facing small businesses in Israel, we
also have focused on economic policies that affect their success or failure
directly. The KIEDF Koret Fellows Program bridges the gap between dayto-day small enterprise in Israel and the need for policy reform. Fellows,
selected from the top graduates of Israeli universities, work with legislators
and government regulators to develop and advocate free-market policies
that advance small-business development, employment expansion, and
private-sector economic growth.
In the following pages you will read a few of the thousands of stories of
KIEDF loan recipients and KIEDF Koret Fellows whose work we support,
and learn how KIEDF has changed their lives.
I invite you to join our distinguished boards of directors and supporters in
advancing the work of KIEDF.
Abraham D. Sofaer
AFKIEDF President
HISTORY
OVERVIEW
AFKIEDF
Supporting economic innovation in Israel
Koret Israel Economic Development Funds (KIEDF)
began as a modest experiment by the Koret Foundation
of San Francisco to deploy private philanthropy for economic development in Israel. Funded by Koret through
the American Friends of Koret Israel Economic Development Funds (AFKIEDF), the program has grown far
beyond expectations to include a variety of loan guarantee programs as well as policy reform initiatives.
KIEDF’s goals are twofold: innovation in channeling
financing to small businesses, and reform to advance an
efficient, effective, free-market economy.
The efficiency of this enterprise is remarkable. Operating expenses consistently constitute less than 5 percent
of financing facilitated, and the loan default rate since
its inception in 1994 has been 1 percent of financing
guaranteed.
With special focus on new immigrants, young entrepreneurs, and small businesses in the Negev and the
Galilee, KIEDF has successfully overcome impediments
from entrenched institutional interests, such as limited financing options, stringent bank credit policies,
and ineffective government programs, to prove that the
perceived high risk associated with small-business loans
is unfounded.
KIEDF programs
KIEDF Managing Director Carl Kaplan and KIEDF Board
Chairman Maj. Gen. (Ret.) Eitan Ben Eliahu oversee these
key programs based on the KIEDF model that puts philanthropic dollars to work to help fuel Israel’s economy.
• KIEDF Small-Business Loan Fund leverages loan guarantees and provides interest subsidies to small businesses
lacking access to credit on reasonable terms, in partnership
with Bank Otzar Hachayal and Discount Bank;
• KIEDF Microenterprise Fund provides loan guarantees
to economically disadvantaged populations seeking to
establish home-based and other small businesses, in
partnership with Economic Empowerment for Women,
other organizations, and Bank Hapoalim;
• KIEDF Israeli Arab Loan Fund leverages loan guarantees to businesses owned by Israeli Arabs, or jointly
owned by Israelis and Israeli Arabs, in partnership with
The Center for Jewish and Arab Economic Development
(CJAED) and Mercantile Discount Bank;
• KIEDF Koret Fellows Program provides annual fellowships to exemplary postgraduates to serve as economic
policy advisors for select members of the Knesset and
other government agencies. The program strives to develop legislative and regulatory policies that facilitate
small-business development, employment expansion,
and private-sector economic growth.
Today, KIEDF has become a dynamic financial services
platform. Working with a growing number of partners,
the program offers innovative, market-based, private sector solutions to stimulate economic expansion in Israel.
www.afkiedf.org
From the M anaging D irector of KIEDF
On behalf of the board of directors, the staff, and most importantly, the
tens of thousands of Israelis who have been touched by our programs, I
want to thank the American Friends of KIEDF and the Koret Foundation for
their foresight in establishing KIEDF, and their unwavering support for our
work.
Carl Kaplan develops and manages
all aspects of KIEDF’s activities in
Israel. In addition to the loan and
fellows programs, Carl is engaged
with developing new partnerships
and programs, fundraising, board
development, and relations with
AFKIEDF and other sources of
support.
KIEDF has become a flagship representing two fundamental changes in Jewish philanthropy in support of the State of Israel: The first is the growth of
directed giving, coupled with the demand for performance, accountability
and transparency. As the vast majority of Jewish wealth has flowed to both
public and private foundations, so too has the impact of directed giving
from these sources grown to fund needs unmet efficiently by traditional institutions. The second, less recognized change is the deployment of philanthropy for economic development, and for the reversal of economic policies
in Israel that inhibit free-market growth, stymie employment opportunity,
and prevent thousands from escaping the cycle of poverty.
The AFKIEDF and Koret commitments have enabled us to demonstrate that
small-business lending in Israel is a small risk and that microfinance lending is the most effective way to improve the plight of the impoverished. In
addition, our experience shows that improving the economic condition of
Israel’s minorities offers a viable route toward peaceful coexistence. Lastly,
we continue to demonstrate how established western economic policies can
substantially improve the climate for the small-business sector
Carl H. Kaplan
KIEDF Managing Director
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KIEDF STAFF IN ISRAEL
Fahina Klarin, Deputy Director, Fund Operations
Fahina Klarin is responsible for the day-to-day management of all fund
programs, including intake, business plan review, loan committee approvals, working relationships with partner banks, and record keeping
and reporting. Fahina is based in the original office in Beersheva which
she established at the inception of KIEDF in 1994.
Chagit Rubinstein, Program Director, KIEDF Microenterprise Initiative
Chagit Rubinstein initiates and manages the various microfinance
programs of this developing KIEDF initiative that includes intensive
training, credit, and post-loan mentoring. Programs are targeted primarily for various disadvantaged populations, including welfare-dependent
women and Negev Bedouin. Chagit’s challenge involves implementing
first-of-a-kind programs in Israel and persuading philanthropists of the
substantial need.
Ala Agbaria, Program Director, Israeli Arab Loan Fund
Working from the offices of KIEDF’s partner, the Center for Jewish
Arab Economic Development, Ala Agbaria identifies applicants from
the Israeli Arab sector and from jointly owned Jewish and Arab businesses that would qualify and benefit from a small-business loan. He
oversees the application, business plan, and approval processes with
the partner bank.
Zev Golan, KIEDF Koret Fellows Program Director
Zev Golan recruits, selects, trains and supervises the KIEDF Koret
Fellows, and maintains program relations with the Knesset and other
placement locations. With the Senior Fellow he oversees the identification, development, and editing of the fellows’ research initiatives
published at year-end. Intently interested in bringing free-market solutions to Israeli business challenges, he inspires the fellows to focus on
reforms that can tangibly improve the small-business climate in Israel
while helping legislators and regulators understand the importance of
capital markets, credit, and related economic reforms.
Glenn Yago, Senior Koret Fellow
Glenn Yago is Director of Capital Studies at the Milken Institute and a
leading authority on financial innovations, capital markets, emerging
markets, and environmental finance. As the Senior Koret Fellow, he and
Program Director Zev Golan oversee the fellows’ research on economic
and financial reform in Israel, focusing on the innovative use of financial instruments to solve longstanding economic development, social,
and environmental challenges. His work has contributed to policy innovations fostering the democratization of capital to traditionally underserved markets and entrepreneurs in the U.S. and around the world.
Photo by Itzak Harari
Knesset Member Amnon Cohen consults with KIEDF Koret Fellow Meytal Snir.
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KIEDF KORET FELLOWS
The Koret Fellows program was merged with KIEDF to create a synergy between
economic policymaking and small-business issues.
KIEDF Koret Fellows are selected from among the brightest graduates of Israel’s
universities, placed with Members of Knesset or regulatory agencies as economic
analysts, and given the opportunity to undertake research on issues that facilitate
small-business development, employment expansion, and private-sector economic
growth in Israel.
Meytal Snir
Batting for small business
(Jerusalem) — Unsure of what to expect from her KIEDF Koret Fellowship, Meytal Snir
got a very pleasant surprise.
“My MK (Member of Knesset) actually spends time with me to understand the issues that
I am working on, and he listens to what I have to say,” the Ben-Gurion University graduate
said. “That was the biggest surprise, and a very good one!”
Snir works with MK Amnon Cohen, who has mentored several Koret Fellows (see Mohliver,
p. 6 and 7) and who served as Economics Committee chair during her fellowship. For his
part, the Shas party member found Snir to be an incredible asset.
“I wish every Member of Knesset could have a KIEDF Koret Fellow,” Cohen said. “She
pays attention to my work, her research is thorough and thoughtful, and at the end of the
day, I rely on her for a great deal of policy reform that I put forward.”
Cohen, who has been assigned KIEDF Koret Fellows in the past, is a big supporter of
the program. Because Knesset members do not have large staffs like U.S. senators and
members of Congress do, the fellows play a key role in policy development, reform, and
enactment.
Now working on her master’s degree in business administration (MBA), Snir’s research
focuses on making television advertising available to small businesses. Commercial stations have the monopoly on TV advertising and charge prices so high that only the very
largest Israeli companies can afford it, Snir said.
“I’m in favor of leveling the field,” she said. “Small business is the route to economic
sustainability for Israel.”
www.afkiedf.org
KIEDF KORET FELLOWS
Aharon “Nonie” Cohen Mohliver
Education fuels
economic upturn
(Jerusalem) — Behind his back, Aharon “Nonie” Cohen Mohliver’s colleagues
call him “a little Bibi,” a reference to Knesset Member and former Prime Minister
Benjamin (“Bibi”) Netanyahu, the political dynamo with whom he has spent the
second year of his KIEDF Koret Fellowship.
Energetic, articulate, and highly motivated, Mohliver has dived into policy research
with a vengeance. In his first year, working with Economics Committee Chair
Amnon Cohen, he wrote not one, but two policy papers on conditions adversely
affecting small-business interests in Israel: one on bank credit and one on business
licensing.
The issues, now under discussion in the Knesset, underscore core structural
problems in the Israeli economy. And therein lies the power of the KIEDF Koret
Fellows Program: Problems encountered by small businesses in the field are
examined by fellows selected from the brightest graduates of Israel’s universities and placed with members of the Knesset or with regulatory agency heads.
The fellows’ mission is to develop and advocate free-market policies addressing
issues that facilitate small-business development, employment expansion, and
private-sector economic growth in Israel.
Mohliver, a Hebrew University graduate, was one of the rare fellows invited to
continue in the program a second year. Working with the well-known Netanyahu,
he has focused on a problem of personal interest: the Israeli education system.
Building on the Dovrat report, a study similar to the No Child Left Behind Act,
Mohliver advocates for education reforms that will bring a businesslike approach
to education, including local autonomy for principals to make personnel and
budget decisions, and higher salaries for teachers. Unless it’s improved soon, Israel’s education system will impede the country’s ability to compete in the global
marketplace, Mohliver said.
“Education is a key to economic success,” he said. “The Israeli people deserve nothing
less than an excellent education system that will help us succeed internationally.”
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Knesset Member and former Prime Minister Benjamin Netanyahu works with KIEDF Koret Fellow “Nonie” Mohliver to develop
business-friendly legislation.
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K I E D F Microenterprise I nitiative
Providing loan guarantees to economically disadvantaged populations seeking to establish
home-based and other small businesses, KIEDF’s Microenterprise Initiative partners with
Economic Empowerment for Women, other organizations, and Bank Hapoalim to identify
program candidates and help them to qualify for loans of up to $5,000.
Arab women’s collective
Field of dreams
(Macker, Israel) — A collective of Arab women has built a field of dreams with
microloans guaranteed by KIEDF.
Just as Popeye touts his spinach, Arab mothers tout zaatar as an herb that will
make children smart. So these Arab women — each a wife and mother — had
little trouble deciding on the enterprise to finance with their pooled microloans. Motivated to go into business for themselves, and assisted by the Rural
Women’s Development Project and KIEDF, they rented a field, bought supplies
and plants, and returned to the land — as farmers, which is traditional for Arab
women, and as owners of their own crop, which is not.
Their training included assertiveness and personal presentation, how to make
and market prepared foods, and a taste of business management.
The women, who come from the village of Macker, near Akko, ride a bumpy
road some three miles long to land in the field they call their own. A lean-to,
built of two-by-fours and a flimsy tarp, offers shady respite from the blazing
sun, a place to sit back on pillows and take stock of their work over Turkish
coffee brewed on site.
Here, they decided to sell half the crop as processed zaatar, or hyssop, which is
used as a spice on pita and other foods. The other half is sold as mature plants.
With the help of a business consultant provided by the program, they are tracking the expenses and proceeds of each to determine the most lucrative way to
market their crop.
“They are doing it with their heart,” said Chagit Rubinstein, KIEDF microenterprise initiative program director. “With heart, and support of their families,
their village, and KIEDF, this women’s collective will realize its dreams.”
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KIEDF M icroenterprise I nitiative
Ilana Boutique
Fashion forward
(Tel Aviv – Jaffa) — Ilana Sharon is banking on her passion for fashion to build a
lucrative livelihood. By facilitating a microenterprise loan, KIEDF is banking on her.
Working by day as an accounting assistant, and as a creator of couture fashions by
night, Ilana faced a challenge in reaching the buying public. Her loan allowed her
to quit her day job and open a sample store in Old Jaffa where well-dressed women can select from a variety of styles as the basis for their custom-made clothing.
Not one to rest on her laurels, Ilana has identified an untapped market. In addition to her Jewish customers, she is trying to attract Arab women. Few outside
the Arab culture know that Arab women dress impeccably beneath their robes
and dress up in finery for single-sex social celebrations.
“They appreciate my designs and they appreciate quality,” Ilana said.
It takes about a week from order to completion of a garment, said Ilana, who
sends piecework out so that she can staff her store. She hopes soon to be able to
buy a sewing machine for the store, so that she can show her customers how she
works, and work on garments when she’s not helping customers.
Ilana’s hope is that her Moroccan-style, hand-embroidered shoes, bags, and boots
and her custom-made dresses of the finest fabrics will provide the breakthrough
she needs to repay her loan and net a profit.
“It’s been my dream to have a business of my own,” she said. “Without the loan, I
wouldn’t have opened. I wouldn’t have had the means or the courage.”
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K I E D F Israeli Arab L oan Fu nd
Leveraging loan guarantees to small businesses owed by Arab Israelis, or jointly owned
by Jewish and Arab Israelis, this program partners with the Center for Jewish and Arab
Economic Development and Mercantile Discount Bank to assist those otherwise lacking
access to credit.
Amo Electronics
Power up
(Tel Aviv – Jaffa) — Bridging the gap between Jewish Israel and Arab Israel,
three entrepreneurial brothers have left the familiar territory of their Arab village to set up shop in Tel Aviv-Jaffa, the heart of Israel’s electronics industry.
Employing Jews and Arabs who work side by side, Amo Electronics installs
custom light-touch systems for smart houses owned by wealthy Israelis. The
expensive state-of-the-art materials require working capital and the extension
of credit — both tough to get without a hand up.
For KIEDF and the Center for Jewish and Arab Economic Development
(CJAED), the decision to back Amo Electronics was a snap.
“One of the strengths was that three brothers own the company and they are
personally invested in the work,” said Ala Agbaria, KIEDF-CJAED fund manager. “It looked like a good risk.”
The Allawi brothers bring a variety of expertise to their enterprise: Nizar holds
an MBA from the University of Haifa, Moayed is a certified electrical engineer,
and Wisam is a sales representative.
Their willingness to assimilate into Israel proper and to integrate Jewish and
Arab employees was also an indicator of their future success.
Their small-business difficulties — owing Value Added Tax (VAT) to the government before receiving payment for their own work, and working as subcontractors
on government jobs because they are too small to bid on government contracts
themselves — are just two examples of small-business issues targeted for economic
policy reforms by KIEDF Koret Fellows. Both VAT and government tender policies
are currently under review by the Knesset.
Growing at 20 to 30 percent a year, it’s no wonder the loan fund managers
who watch over Amo Electronics’ business activities call the Allawi brothers
“trailblazers.”
“They branched out of their community into Tel Aviv, they’ve relocated into
Israel’s business center, they’ve integrated Arabs and Jews…. They are blazing a
trail for free-market success.”
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KIEDF I sraeli Arab L oan Fu nd
Ahab Diab Day Care Center
Love, American-style
(Akko) — The gentle stirring and stretching of little arms and legs from beneath a
sea of fluffy pink comforters means it’s wake-up time at the Ahab Diab Day Care
Center, the only center for Arab toddlers in Akko.
The clean scent of fresh laundry and the tinkling of gentle music permeate the
cheerful center, strategically located near a community health clinic. Director Igbal Swaed practices grassroots marketing: On the broad sidewalk out in front, she
encourages pregnant women on their way to and from prenatal checkups to have
a look at the fee-for-service day care center she has created. She knows that many
modern Arab women are eager to break the old-fashioned mold of leaving their
children with a grandmother, seeking instead a more enriching environment.
At this center, named for an Arab student at the Technion who drowned at the age
of 25, children learn English, movement, and music as part of their preschool curriculum. A speech therapist, a child psychologist, and an infant masseuse make
regular visits and consult as needed. Hot breakfast and lunch are served each
day. While the scenario sounds standard to an American consumer, it offers a
courageous innovation to the Arab community. As testimonial to the timeliness
of Igbal’s idea, the center opened with 35 children ages three months to three
years. Six months later, it was fully subscribed with 52 children cared for by 12
employees.
“There’s a different approach to childcare here,” she explained. “Here you have to
pay, and yet people still prefer to come here.”
Igbal and her husband used their savings to secure the location and mortgaged
their home to realize this dream, but it was the loan facilitated through KIEDF’s
Arab-Israeli loan program that “made the difference in giving me the confidence
to open,” she said.
“It would have been very difficult to open without the loan,” Swaed said.
“We waited for it so we could do it right.”
www.afkiedf.org
KIEDF S mall -Bu siness L oan Fund
The original KIEDF program works in partnership with Bank Otzar Hachayal
and Discount Bank to leverage loan guarantees and provide interest subsidies to small businesses lacking access to credit on reasonable terms.
Schiller, Ltd.
Upward mobility
(Herzliya) — His eight-year-old son nicknamed him “Spiderman” for his
agility in scaling the marble-faced buildings that he restores, but a few years
ago Raviv Schiller was tangled in a web not of his own making.
“I was at a point where I didn’t have money to survive,” Schiller said. “It wasn’t
that it was so much money I needed, but when I was stuck, Koret was the only
one who helped me get financing and helped me get back on my feet.”
Schiller and nine of his 11 employees at Schiller, Ltd., which has developed
a unique method for invisibly adhering marble facing to building exteriors,
had been called into reserve duty to do battle in Jenin during the height of the
Intifada. His two main clients stopped paying their bills, the Value Added Tax
(VAT) on materials was due, and his wife was pregnant with their third child
when the couple learned that their then three-year-old daughter needed heart
surgery. With no one to run the business, expenses piled up while income
dwindled to zero.
Schiller’s wife, Mira, began a letter-writing campaign, first to VAT officials
and then to members of the Knesset, asking for a tax payment schedule,
but her pleas fell on deaf ears. When a military reporter for Israeli radio got
wind of the situation, the Schillers’ luck began to change.
Pressed aggressively by the news reporter in an on-air interview, the VAT
director relented, offering the payment schedule that Schiller needed. And
when a KIEDF staff member heard the radio report, she put in a call to Schiller and offered the possibility of a loan.
A year later, Schiller’s business had tripled. Today, it has doubled in volume
again. He now serves five to 10 clients at a time, employs a staff of 50, and has
developed the “Schiller, Ltd.” name into a known, quality brand in Israel.
“The loan motivated me to get up and get it together,” Schiller said. “Next
year will be even better.”
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K I E D F Small - B usiness L oan Fu nd
Tamuz Institute
Healing Israel’s heroes
(Haifa) — In a nation plagued by terrorism and trauma, the Tamuz Institute is
an oasis of tranquility tucked high in the hills of Haifa.
Serving victims of terrorism, those who have lost loved ones through military
service, and released prisoners of war, developmental psychologist Dr. Tirtsa
Joels and clinical psychologist Orna Afek provide essential counseling services
to a market that, sadly, continues to grow. Managing their growing demand has
been eased with a loan through KIEDF.
Joels and Afek used their loan to hire a consultant who not only developed
a marketing plan for them, he reorganized their business, recommending a
second location in Tel Aviv that more than tripled their income.
Before obtaining the loan, Joels and Afek operated a frenetic clinic of 11 hourly
free-lance therapists in Haifa.
Today, their Tamuz Institute is an interdisciplinary center employing 20 clinical
and developmental psychologists, psychiatrists, social workers, and credentialed
therapists in Haifa and Tel Aviv, serving 150 clients each year.
“We invested the loan funds in marketing and hired a consultant who recommended major revisions in our business operations,” Joels said. “We really
changed the manner of managing the place.”
Soon the Israeli government took notice and began to send victims of psychological trauma their way.
The government health department authorized Afek to train clinical psychologists under the Tamuz Institute’s auspices — quite an accomplishment for a
private enterprise. Today, Tamuz is one of Israel’s largest providers of services
to families who have lost loved ones in the military.
“We wouldn’t have managed to grow and to create work for so many people
without KIEDF,” Joels said. “We are thriving because of KIEDF.”
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www.afkiedf.org
We are committed to increasing both our lending capacity and our policy
research program. To help us continue addressing the financing and policy needs of
small businesses in Israel, please consider lending your support through AFKIEDF.
To discuss how you can help, please contact us:
AFKIEDF
33 New Montgomery Street, Suite 1090
San Francisco, CA 94105
www.afkiedf.org
Photography: Miki Koren Studio, Tel Aviv
By merging the Koret Fellows Program in economic policy research with KIEDF, we
have created synergy between small-business issues and economic policymaking.
Graphic Design: Casey Dillon, San Francisco
Those of us privileged to offer organized support for the work of KIEDF are especially pleased that our loan guarantee model has proven its effectiveness even under extremely difficult economic conditions. Since its inception in 1994, KIEDF
has become a premier private source of financial assistance to small businesses
— so much so that the Israeli government has adopted the KIEDF model for its
own small-business loan program.
Editor: Susan Wolfe, San Francisco
How you can help
www.afkiedf.org
American Friends of Koret Israel
Economic Development Funds
www.afkiedf.org