It is difficult to argue against the root principle of veteran pension fund Mivtachim's decision to finance part of the purchase of the IDB concern by the group of investors headed by Nochi Dankner. Few economists and market players would oppose the pension fund's entering into the capital market, the increased involvement of institutional investors in financing growth in the economy, and the creation of alternatives to the banking establishment, whose resources are dwindling.

However, a review of the pre-deal decision-making process at Mivtachim before its board granted approval yesterday raises serious concerns about how the money of hundreds of thousands of pensioners is being managed.

The optimal situation would be for the pension funds to enter into the field of financing in a cautious and measured manner, while preserving a fitting dispersal of their capital and taking calculated risks.

Thus, the funds should set up a system for granting loans that is based on experienced credit officers and analysts who know how to read reports and business plans; a professional management that will set standards in keeping with the nature of the risks posed; and, overseeing it all, an unbiased board of directors to review meticulously every deal that comes up for approval, a board that will ask questions and won't hesitate to rule out problematic deals.

This is the way the banks work; and even so, they make serious mistakes and get into terrible messes.

Mivtachim's decision to finance a portion of the IDB deal was taken in a manner that is completely opposite to the optimal model. A fund that till now had afforded small loans primarily to its members has, for the first time, entered into a huge deal, without having accumulated any similar experience, and without having the professional tools to analyze its viability.

Migdal Insurance backed off from financing the deal and several banks shied away, too, surely a warning signal for Mivtachim chairman Shmuel Avital and his people; but these facts did not make an impression on him. He brought the decision to finance the IDB deal to the board only after the directors pressed him into discussing the matter.

Mivtachim is slated to finance the deal in accordance with a "non-recourse" format; namely, the share acquisition that it is financing is the only security for guaranteeing the loan of $50 million to Dankner and his partners. Commenting on this, the deputy governor of the Bank of Israel, Prof. Avia Spivak, said last week that the banks had lost hundreds of millions of dollars in deals of this kind.

At the Bank of Israel, Spivak is responsible for economic stability, and his statements are supposed to find attentive ears at Israel's largest pension fund, which controls a market share of 55 percent. But Spivak's position didn't convince Avital, who likes to define himself as "a peasant from the Negev."

Avital may be a peasant, but with his instincts, he understands that the entrance of a pension fund into the field of financing is testimony to a modern economic perception, and also makes him an address for other entrepreneurs, who are making pilgrimages to him.

On the way to realizing his economic perception, Avital skipped over the essential stations of setting up a professional credit system, accumulating experience in the world of financing and consolidating a risk-management policy - a skip that could end in a fall.