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Jews or army veterans are the only ones entitled to receive interest-free loans from a fund run by the Association for Interest Free Loans in Israel.

The fund has its offices in Jerusalem and contributions to the fund are tax deductable.

"The loans are intended for Jews only, or for those who completed army service." So say official documents from the Entrepreneurial Promotion Centers (MATI) in the Western Galilee, an official body that is part of the Small and Medium Businesses Authority, which is under the auspices of the Ministry of Trade and Industry.

The fund makes loans, via the MATI organization in the Western Galilee to, businesses in the North and the Haifa region that were damaged during the war. The loans are for up to NIS 45,000 per business, and the recipients have up to 40 months to pay back the loans.

According to MK Azmi Bishara, the chairman the Balad party, "MATI in the Western Galilee, which is a government body, is lending a hand to a violation of the law that outlaws discrimination on the basis of nationality and race."

Bishara called on the Small and Medium Businesses Authority to cancel its arrangements with the Interest Free Loan Fund, even though its loan plan for Northern businesses is extremely attractive.

In response, the authority said that MATI is not involved in giving out the loans to businesses.

"MATI is only a conduit for transfering the money to its destination. In this case, we are dealing with a private philanthropic fund that set its own conditions for giving loans to businesses in the North. That is its right, even if the matter is not to our taste.

"MATI is not allowed to change the conditions for transferring the money set by the fund. There is also a fund guaranteed by the state that provides loans only to the Arab sector. It you wish, that is reverse discrimination," responded the Authority.