S.F.-based Koret fund jump-starts Israeli businesses

Of all the many philanthropic endeavors American Jews support in Israel, only one can boast it has created more than 1,500 jobs in the Jewish state — in addition to the 4,500 existing jobs it is helping to sustain.

So says Carl Kaplan, managing director of the Koret Israel Economic Development Funds, during a recent visit to San Francisco.

KIEDF was founded in April 1994, as an arm of the S.F.-based Koret Foundation, to help fledgling businesses in the Negev Desert region of Israel.

The idea was to provide financial assistance through direct loans from KIEDF. The result is not only eliminating the bureaucracy that often accompanies funding new businesses, but also acting as a guarantor so small operations that might otherwise have difficulty receiving aid could apply for bank loans. The fund grants loans to everything from a mom-and-pop grocery store to high-tech startups.

In its first year, KIEDF provided about 30 loans to small businesses, for a total of roughly $5 million. Last year, it granted more than 1,000 loans, for a total of $45 million.

"We're at a point now where 150 of the loans we've made have been paid back," Kaplan said.

An American-born investment banker who moved to Israel in 1990, Kaplan spends half his time working for KIEDF. With the only other employee a full-time program officer in Israel, the organization's overhead has never been more than about 2 percent of its income.

While 40 percent of the grants still go to businesses in the Negev region, as the fund has expanded, so has its coverage area. KIEDF is now supporting businesses throughout Israel, with special attention to the northern Galilee region, including Kiryat Shmona and its environs.

The S.F-based Jewish Community Federation is partnered with this region through Project Renewal, which offers economic assistance to lesser-developed regions throughout Israel. The fund merged with KIEDF in late 1998. KIEDF approved more than 35 loans in the area in 1999, supporting such enterprises as small industry, services and tourism.

Now 10 percent of KIEDF's grantees are in this region.

"We expect more to be serviced in that area now that we've withdrawn from Lebanon," said Kaplan. "There's more reason to support economic development there."

Loans range anywhere from $15,000 to $250,000.

While Israel has built a worldwide reputation in the high-tech industry, perhaps only 15 percent of the workforce is actually employed in that field. And among the 85 percent in other fields are numerous small businesses, Kaplan said.

Some recipients of KIEDF grants include Studio Gloria, a wedding-dress designer; The Russian Word, an importer and distributor of Russian language books and materials; a dental clinic opened by an immigrant from Argentina; and the first law office opened by an Ethiopian immigrant.

In one case, four families who live on Moshav Shachar in the northern Negev received money from the fund to develop their flower-growing and exporting operation. The families were then able to qualify for a matching grant from the Ministry of Agriculture, according to Kaplan.

Applicants to KIEDF undergo an extensive screening process overseen by a board of consultants. Candidates must have some work experience and speak Hebrew well enough to conduct business in the language. While it is not required, KIEDF favors businesses either begun by, or that hire, new immigrants. In fact, 25 percent of all loans go directly to businesses run by newcomers who have immigrated to Israel since 1989.

Obviously, a great number of them are from the former Soviet Union, but the fund has also helped Ethiopian emigres, those from various other countries and native-born Israelis.

KIEDF's loss rate is less than 1.5 percent, said Kaplan, adding, "If we don't have any losses, we haven't taken enough risk."

Others have taken notice of the KIEDF's approach, both within and outside of Israel. In addition to the JCF, local donors include the East Bay and South Bay federations, plus the Bernard Osher Jewish Philanthropies Foundation and the Taube Family Foundation. Several federations and philanthropies nationally have contributed, and recently KOOR Industries Ltd., became the first Israeli corporation to add to KIEDF's coffers.

Unlike more traditional forms of giving, Kaplan said that because so many of the loans have been paid back, Koret's initial investment of $5 million is now being disbursed for the seventh time.

"This shows you can do creative things with philanthropy. It's not just writing a check for a building but seeing where your money is going."

Alix Wall
Alix Wall

Alix Wall is a contributing editor to J. She is also the founder of the Illuminoshi: The Not-So-Secret Society of Bay Area Jewish Food Professionals and is writer/producer of a documentary-in-progress called "The Lonely Child."