In First, Israeli Bank Launches Program for Bedouin Mortgages

Move comes as government seeks to encourage Bedouin to move to officially recognized communities

An all-terrain vehicle seen near homes in a Bedouin community in the Negev.
Eliyahu Hershkovitz

Tens of thousands of Bedouin living in the Negev will be able to apply for a mortgage through a new program launched by Bank of Jerusalem, the bank said on Sunday.

The bank said it began exploring the idea after executives read in TheMarker earlier this year an interview with Yair Maayan, head of the government’s Bedouin Development Authority, that described the problems Bedouin face trying to get home loans.

Of the approximately 260,000 Negev Bedouin, only about 20 every year qualify for a home loan.

“We saw Yair Maayan’s remarks in TheMarker to the effect that quite a few educated families earning more than 10,000 shekels ($2,840) a month could get general purpose loans, but not a mortgage to buy a home,” said Bank of Jerusalem CEO Gil Topaz.

A tiny lender that does a relatively big home loan business, Bank of Jerusalem has a mortgage portfolio of 9 billion shekels (about $2.5 billion), a major part of which is loans to Israeli Arabs. “For us, the story fit well with our strategy as a niche bank, a boutique looking to offer services and products to special populations,” said Topaz.

A delegation of bank executives visited the area recently and met with Bedouin community leaders. In the end, they were convinced that the bank would be able to make mortgages without imposing any special requirements on borrowers, Topaz said. The first few applications for loans are being processed.

Israeli Arabs have been largely shut out of the mortgage market, and among that minority, Bedouin have suffered the worst. Figures show than only 0.5% of the Israeli Arab population is able to take out a home loan, but for Bedouin the rate is 0.1%.

Part of this is due to the low socioeconomic status of Israeli Arabs. Higher rates of poverty and joblessness than for Jewish Israelis make it much more unlikely they will qualify for a loan. But the rates are higher for Jewish Israelis living in the Negev (5%) and for ultra-Orthodox Jews (13%), two populations with relatively high rates of poverty as well.

The banks attribute this gap to the other problems Israeli Arabs face in getting mortgages – mainly high rates of illegal construction and poor land registration records in their communities.

Another problem is the absence of a secondary market for homes because Arabs tend to live among extended families. If a bank repossesses a house, it won’t be able to put it up for sale to the general market.

The Bedouin Development Authority convinced Bank of Jerusalem that the risks could be managed. Among other things, Maayan pointed out, it’s also difficult for banks to repossess a house in the Jewish sector because it hurts the lender’s image.

He also pointed to the Bedouin tradition of repaying debts and the ability of tribes to help families in arrears. There’s also a growing middle class.

“There are thousands of Bedouin who work at steady jobs in the government, in the Education Ministry, that haven’t been able to get a mortgage. There are even couples who are both doctors at Soroka who haven’t gotten mortgages,” Maayan said, referring to the medical center in Beer Sheva. “It’s a scandal.”

The government has more than a passing interest in encouraging mortgage borrowing by Bedouin. It has been trying to resettle them in recognized towns and for that purpose has designed tens of thousands of lots for them at no charge. To entice them further, it even offers a 250,000-shekel grant to anyone willing to take one.

However, the problem until now has been that the property owners have no way of financing construction of a home on the lot. To help Bedouin borrowers, the government has established a fund to provide guarantees, but the initiative has been slow in getting off the ground and the banks until now have refused to give mortgages.

Bank of Jerusalem will be offering home loans of up to 550,000 shekels to couples. The loan is conditioned on both adults working at regular salaried jobs for at least three years with a combined monthly income of 11,000 shekels.

However, there is some concern that as the only lender in the Bedouin market, Bank of Jerusalem won’t be offering applicants attractive interest rates,