The immigrant loan fund is empty, but the state still advertises it

An Immigrant Absorption Ministry fund that is supposed to provide loans to new immigrants and Israelis returning from abroad has not been allocated money to operate, TheMarker has learned.

Officials from the Small Business Development Centers ("Mati"), which run the Fund for the Self-Employed Immigrant, say 150 entrepreneurs have been waiting for more than three months to receive loans, and are absorbing losses as a result.

The loan approval committee has not met since November. According to Mati sources, all loan applications are being denied due to a lack of funds. Nevertheless, the sources say, the Immigrant Absorption Ministry is continuing to advertise the fund, and it is one of the state's means of encouraging immigration and repatriation.

Sources in Mati who declined to be identified - including business consultants who work with the agency - say some returning citizens decided to go back to their adopted countries when the loans failed to materialize.

"These are generally people with a business abroad who want to continue that momentum when returning to Israel," one figure said. "The aid is late in coming, because of the unprofessional and somewhat deceptive conduct."

"This is an unprecedented scandal," one source from Mati said.

"Last year the money came after only six months, and then loans were approved only for a third of the applicants, and each one received only half the sum requested. We expected that this year things would return to normal, but now it turns out there's no money at all. At the end of 2009 Mati was given money to advertise the loans but there's no money for the loans themselves."

Immigrants are eligible for a loan of up to NIS 100,000, for up to 10 years after their immigration date (15 years for immigrants from Ethiopia). Returning citizens are eligible for two years after moving back to Israel. What makes the loans special are their easy terms: inflation-linked, with interest of just 2%, payable over six years, the first of which is a grace period during which only the interest must be paid. The loan turns into a grant after three years if the immigrant continues to earn a living from the business.

Iris Castleberry returned to Israel a year ago after living in the United States for several years, and opened a beauty salon similar to the one she owned in the U.S.

"Immediately after my return I took a course at Mati and was told that I would get a loan from the Immigrant Absorption Ministry, at very comfortable terms. I got really excited, especially since I hadn't returned to Israel in particularly good economic shape. I took out a bank loan with a document from Mati confirming that I stood to get money from the ministry and that when it came, I'd repay the bank loan. I did all the paperwork and ran from one place to another, and the money didn't come. We're a family with three children, and this is a heavy burden," Castleberry said.

Gilad Avrahami, a senior manager in the Immigrant Absorption Ministry's Business Entrepreneurship Department, said in response: "The ministry is negotiating with the treasury's budget division over allocations for ministry activities, including the loan fund. The loan fund usually is not adequately budgeted and must receive additional allocations. When the negotiations develop we will know what is in store for 2010. Until then we are not declaring the fund inactive because the ministry still views it as relevant. The ministry recognizes the fund's importance in aiding the small businesses of new immigrants and returning residents, and will do all it can so that it can continue to operate."