Israeli Government Plans Investment Fund for Social Projects, With Netanyahu's Backing

Beyond regular profit motive, social businesses have social goals, like Tel Aviv's Lilith restaurant, which employs troubled teens and offers them the opportunity to learn cooking as a profession.

On the eve of Rosh Hashanah, the government will announce an unusual social initiative - an investment fund for social projects. The model is akin to that of the Yozma venture capital fund, which operated in the early 1990s and was the first fund to invest in Israeli technology start-ups.

The fund has the full backing of Prime Minister Benjamin Netanyahu and is being advanced under the auspices of the National Economic Council in the Prime Minister's Office. Driving the effort are Eugene Kandel, chairman of the council, with Udi Prawer, head of the policy division in the Prime Minister's Office.

The fund will encourage investment in so-called "social businesses."

A social business is a business in all ways, including the profit motive, but it also has social goals. Among the best known in Israel are the Lilith restaurant in Tel Aviv, which employs teenagers who've gotten into trouble and gives them the opportunity to get a profession and learn about the world of cooking; and the Call Yachol call center company, which employs the disabled.

There are almost 200 social businesses in the country, but most have a very difficult time growing as they have a hard time raising credit from banks - or shareholders, as these businesses tend to have low and uncertain profitability.

To help overcome this financing barrier, the government will establish a fund that puts up financial guarantees. The state will take on the initial risk of a loss in such cases, and make it easier for banks or others to invest or provide loans.

Similar funds have been set up recently by the governments in Australia and the United States.

The funding will come initially from the state and philanthropic sources, half and half. The government is considering putting up the initial sum of NIS 10 million, with an equal amount coming from charitable sources.