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Charity gives £76m in zero interest loans

    Listeners to Israeli radio stations have been surprised over the last four weeks to hear adverts for interest-free loans - a particularly unlikely scenario given the global economic crisis.

    These slots are part of what is thought to be the first major advertising campaign by a charity seeking recipients, rather than donors.

    The Israel Free Loan Association (IFLA) is trying to ensure that as Israeli banks tighten their lending criteria - like financial institutions across the world - low earners are not falling into a poverty trap because they are unable to borrow.

    The organisation was founded in 1990 when Dr Eliezer Jaffe, co-chairman of the Hebrew University Centre for the Study of Philanthropy and author of Giving Wisely: The Israel Guide to Non-profit and Volunteer Organisations, decided to establish on a national scale a gamach - a traditional, normally small loan organisation that does not charge interest, according to the biblical ideal. The body grants interest-free loans to low-income individuals and businesses.

    It started out with £13,000, and as of this week has given out loans totalling £76 million.

    Any Jewish Israeli can borrow up to £3,500 so long as they have a household income between £500 and £2,300 per month and can provide two guarantors.

    Dr Jaffe said that since the economic crisis began he has seen a "quantum jump" in loan requests, from 250 a month to more than double that.

    A common reason for requests today is redundancy, which undermines people's ability to borrow at the very time that they are shortest on money.

    He took the decision to advertise because he views it as important for economic stability in the country that individuals know they have a fallback when the bank turns them down. The same is true of small businesses, who he views as central to the economy.

    "The government has neglected small businesses and the banks are not really interested in them," he said.

    The campaign, funded by an unnamed donor, took to radio stations across the country four weeks ago, and has resulted in 3,000 requests for application forms.

    Dr Jaffe wants, through the IFLA, to promote a new attitude to charity in Israel - the idea that charity can be "recyclable" and that there is room for a fund "that doesn't give handouts but a hand up".

    Less than one per cent of debts go uncollected - far lower than the default rates for bank loans.

    He said: "Many organisations find themselves each year looking for new donor money because they don't see their money again. Most of our money has been out and come back three times - and it just keeps on going out and returning."

    One of the target groups for IFLA loans is immigrants who come with little and try to get on the housing ladder.

    Gigno Beyenah, an administrator who lives in Jerusalem, immigrated from Ethiopia in 1998 and after 10 years had managed to save enough to put down a deposit on a flat in Jerusalem. However, he could not afford fees such as lawyers' costs.

    "Many young people today just can't get a mortgage and set up a home, and these loans make a very big difference," he said.

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