New Opportunities For Palestinian Entrepreneurs

By Stephen Kaufman
USINFO Staff Writer

New Loan Opportunities Within Reach of Palestinian Entrepreneurs

Until now, Palestinians who sought loans to launch or expand businesses have faced the prohibitive requirement to offer as much as 200 percent in collateral. With many living below the poverty line, few Palestinians could qualify for loans, and prospects for new jobs have remained elusive.

This situation could change as soon as September, thanks to the Middle East Investment Initiative (MEII), a new public-private partnership between the Palestinian Investment Fund (PIC), the U.S. government's Overseas Private Investment Corporation (OPIC) and the nonprofit Aspen Institute.

The $228 million loan program, which will not require collateral from borrowers, marks the first time Aspen, known for its nearly 60 years of promoting leadership development and open dialogue through seminars and other academic fora, has gone "operational."

MEII's chairman, Berl Bernhard, a trustee and former Aspen chairman, says the organization believes the initiative will help address "a dire need." In an interview with USINFO, he said the current "onerous nature" of borrowing money has retarded the growth of the Palestinian economy and its potential to create new jobs.

"[W]hat we have to offer ... is going to make a dramatic difference," he said. By making loans available at 7 percent or 8 percent interest without mandatory collateral, more Palestinians seriously can contemplate pursuing their business dreams.

"It goes from the top few people being able to borrow to the vast majority of the middle class or lower middle class ... who will be given [that] opportunity," Bernhard said. "My belief is it will open businesses to the many instead of the few who already have the money."

He added that any success in improving the Palestinian economy "could help to give breathing time for other people to try to negotiate some kind of peaceful settlement" to the Palestinians' long-standing conflict with Israel. The organizers hope eventually to expand the program to Gaza.

Bernhard said Aspen is neither partisan nor ideological, and emphasized that MEII is not just a U.S. program. "We have support from surrounding Arab countries and we have huge support from the government of Norway, and we anticipate there will be other foreign governments which will want to support this effort."

With the loans guaranteed by OPIC and the PIC, Aspen will work with Palestinian banks through the nonprofit Community Habitat Finance (CHF) International to explain the new lending program, providing training in the use of new loan materials, standards for lending, types of applications and advanced data systems to track the progress of loans.

In preparation for the initiative, Aspen performed an extensive market survey of the West Bank, but the group is not encouraging the development of any particular type of business or enterprise idea.

"We want the local people at the local level to make that decision along with the banks so that we are not trying to prejudge what will be accepted, what will be the right thing to do, [or] what reduces the risk. ... It has to come from the ground floor up," Bernhard said. This opens the field of potential applicants to anyone who sees a business opportunity - in a wide-ranged of fields.

After spending two years developing the program and learning lessons from previous international efforts to spur the Palestinian economy, Bernhard expressed confidence all the issues hampering earlier attempts have been covered. "[T]he most important part is we've worked out a meticulously detailed plan of implementation so that it's not just some charity that's giving money to the region. It's real business," he said.

More economic opportunities could discourage participation in extremist groups

Toni Verstandig, director of Aspen's Middle East Strategy Group, told USINFO that new economic possibilities and normalization, coupled with increased security, will make a "meaningful difference on the ground" in the West Bank.

She acknowledged that the violent political conflict with Israel has "battered" the Palestinian economy, costing job opportunities for Palestinian workers inside Israel and creating difficulty in transporting goods for sale due to internal roadblocks and movement restrictions.

Economic despair has coincided with growing popular support for extremist organizations such as Hamas, which rejects a peaceful political solution with Israel.

However, public opinion polling indicates the opportunity to lead a quiet, normal daily life would reduce Palestinians' interest in being recruited for extremist organizations. "They want to feed their children. They want their children to go to school safely. And they want to create a normal life just like you and I have," Verstandig said.

Despite the years of economic hardship and political uncertainty, most small- and medium-sized businesses have been able to survive, and could benefit from an infusion of funds to boost production capacity and employment potential.

MEII will create an active lending pipeline at Palestinian banks, resulting in faster application processing. With loan applications already awaiting review, Verstandig hopes the initiative will "catalyze the banks into more robust lending" by September.

"I think if we can begin to have programs that are actionable like the Middle East Investment Initiative ... we can open the window more broadly to a door, and by that larger opening we will create a dynamic for some political traction," she said.

For more information on the Middle East Investment Initiative, see the related press release and fact sheet on the State Department's Web site.

ENDS

(USINFO is produced by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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