Israel is moving forward with plans to set up a development bank that would help finance Israeli companies doing business in developing countries.
Officials from Prime Minister Benjamin Netanyahu’s office met two weeks ago with leading representatives of major global financial organizations two weeks ago to learn their perspectives on forming a bank and the best way of structuring it.
“The issue of financial is critical for operating in these countries and the meeting included very experienced people in the area of finance in these countries,” Yoav Horowitz, chief of staff in the Prime Minister’s Office, told TheMarker.
Among those attending were officials from Citibank, Goldman Sachs, Bill and Melinda Gates Foundation, the World Bank’s International Finance Corporation, Bill & Melinda Gates Foundation, the British government’s development finance unit CDC Group, the Milken Innovation Center and International Capital Market Association.
The initiative comes Netanyahu reaches out to developing countries in Africa, Asia and Latin America. On Sunday, he visited Chad, where the two countries agreed to reestablish diplomatic relations.
“There is a lot that we can do together and we discussed how to deepen our cooperation in every field beginning with security, but also agriculture, food, water, energy, health and many more,” Netanyahu said in remarks posted on the PMO website.
Horowitz said the proposed development bank would help Israeli companies selling to the developing world in particular in the areas of healthcare, agriculture and cybersecurity.
Israel’s cabinet approved a plan in principal last July to “advance Israeli activities in the area of international development.” At this month’s meeting, the international financial experts who attended said they supported the idea and were ready to cooperate with when it is formed.
Their recommendations were to focus lending on medium-sized and small businesses and on high-tech, where Israel has a comparative advantage.
“Israel has a small window of opportunity to act – we have to move quickly,” said Horowitz. “The technologies were we’re leading today will be in other places by tomorrow morning.”
The PMO is now preparing a study that would weigh the advantages and disadvantages, although in the end it is expected to bank the plan.
The two big decisions Israel faces in how much to capitalize the bank with and what structure to adapt.
Development finance institutions like the one Israel is weighing vary considerably in terms of capital. Development Finance Institute Canada, which was formed in 2017 with 300 million Canadian dollars ($226 million) in capital. U.S. International Development Finance Corporation, approved by Congress last October, will get $60 billion in funding.
In Israel’s case, the funding will probably more on the scale of Denmark’s development bank, which has $200 million in capital. In any case, the capital would be leveraged by collaborating with private sector lenders like Citibank and HSBC.
As to the structure, one option is to follow The Netherlands model – a for-profit instruction that is only 51%-owned by the government. Other countries structure theirs as wholly owned government companies or as statutory independent bodies.
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