Israel's Central Bank Plans Non-bank Credit to COVID-hit Small Businesses
The objective of the new monetary tool is to boost credit supply to smaller businesses beyond what is issued by banks
The Bank of Israel said on Sunday it would start offering repo transactions with supervised non-bank credit providers to increase the supply of credit to very small businesses struggling to borrow during the COVID-19 crisis.
It said the new monetary tool would begin operating in the first week of January, with the objective of boosting credit supply to these businesses beyond what is issued by banks.
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These non-bank providers, such as credit card companies and institutions, would be supervised by the Bank of Israel or the Finance Ministry’s capital markets division.
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“In view of the crisis, lowering the cost of the financing source for non-bank credit providers will create an incentive for them and contribute to the pass-through from the general interest rate in the economy to the interest paid by small and microbusinesses for the credit issued to them,” the central bank said.
As part of the repo transactions, the Bank of Israel will receive tradable collateral from the credit card and other providers, including government bills and bonds and corporate bonds under certain criteria.