At the conference, both Jewish and Arab speakers discussed the various options available to Arab-owned businesses to secure funds to promote and develop their businesses; the role accountants, tax advisors and other advisors have in obtaining credit for small businesses; and the role and importance of “business branches” of Mercantile-Discount Bank in promoting and developing Arab-owned businesses.

The main objectives of the event were:

1.To raise the awareness of accountants, tax advisors and other advisors to the various funds available to their small businesses clients, allowing them to apply for loans in order to promote their businesses.

2.To emphasize the importance of the role of such accountants, tax advisors and other advisors in obtaining credit for small businesses by providing all the relevant information and guidance to their clients.

3.To discuss and increase the awareness of the “business branches” or Mercantile-Discount Bank as a new way to develop small businesses in the Arab sector.

4.To increase awareness and knowledge of CJAED’s Sulam Loan Fund, its objectives, terms and availability to small businesses in the Arab sector

The program of the Conference was as follows:

Helmi Kittani, Director of the Center for Jewish-Arab Economic Development opened the conference warmly thanking Konrad Adenauer Stiftung for its partnership and support in holding the conference. Helmi mentioned Konrad Adenauer Stiftung’s continuing support of the Center’s various activities over the past years is most appreciated. Helmi then welcomed the speakers and guests and thanked Mercantile-Discount Bank for its cooperation and support of small businesses. He also emphasized the importance of accountants and tax advisors and their role as the main link between small businesses and the different funds.

Sami Lahiani, Head of the Economic Development Department of the Authority for the Economic Development of the Arab, Druze and Circassian Sectors at the Prime Minister’s Office also took the opportunity to thank the speakers and guests. Mr. Lahiani explained that ever since the Authority for the Economic Development of the Arab, Druze and Circassian Sectors was established, it marked the issue of obtaining credit for small businesses in the Arab sector as an acute issue. Mr. Lahiani said that the Israeli Ministry of Finance recently established a committee that will examine the issue of obtaining credit in the Arab sector and expressed his hopes that these efforts will lead to actual positive results. In addition, Mr. Lahiani announced that by the end of the month an initial database of businesses in the Arab sector will be completed by BDI. This database, he said, is supposed to provide basic updated information to commercial banks for the purpose of providing credit. Mr. Lahiani continued and explained that the Authority established an investment fund for businesses (private equity) and in addition, the Authority, together with the Ministry of Industry, Trade and Labor and the Koret Foundation are in the process of establishing a new additional fund which will provide loans to small and medium sized businesses with terms that are more flexible than the standard securities that banks request

Panel Discussion I: Funds

The panel discussion was moderated by Mr. Muhammad Kassoum, Manager of MATI Nazareth and included Mr. Giora Baran, Director General of Daroma-Tzafona; Ms. Limor Levinstein, Manager of Funds Operations at the Tavor company; Mr. Ofer Isrov, Manager of the Priority Zones, The Israel Department of the Jewish Agency and Mr. Tarek Bashir, Director of the Center for Jewish-Arab Economic Development's Business Unit and the Sulam Loan Fund. The panel discussed the different available funds that small business owners from the Arab sector can apply for, and each panel member represented their fund, its terms, activities and advantages.

Muhammad Kassoum, Manager of MATI Nazareth, explained that MATI Nazareth was established in order to promote small and medium sized businesses in the Arab sector. He determined that such businesses suffer from lack of credit options while receiving credit from the bank is, for the most part, a critical step in the success of a business. Mr. Kassoum stressed the role of accountants and tax advisors in the ability of small businesses to obtain loans and called them to increase the awareness of the existence of such funds among their clients. Muhammad indicated that the Sulam Loan Fund in particular is an initiative that allows small businesses who would have otherwise been refused, to obtain a loan.

Giora Baran, Director General of Daroma-Tzafona gave a presentation about two funds jointly owned by Mr. Eitan Wertheimer and the Jewish Agency which strive to promote economic development in the periphery, especially seeking to assist small businesses/factories in the Galilee, the Negev and the Golan. Giora explained that the funds provide loans of up to 2 million NIS to existing industrial businesses, offering comfortable terms. In addition, after the loan is granted, the funds provide subsidized business consulting to the businesses.

Limor Levinstein, Manager of Fund Operations at the Tavor company presented a fund for small businesses guaranteed by the State of Israel. The fund has been operating for 6.5 years now and over 4,500 loans have already been approved, 10% for businesses in the Arab sector. Limor further explained that the fund provides loans in the amount of 500,000 NIS or 750,000 NIS (depending on the business’s last circulation) and she also provided information about the process and terms for receiving a loan.

Ofer Isrov, Manager of the Priority Zones, The Israel Department of the Jewish Agency, explained that indeed Arab businesses suffer from a difficulty to obtain loans. Ofer explained that their fund is different from other funds in the sense that the donors of the Jewish Agency’s fund are involved in the whole process. To date, Ofer said, over 1,000 loans for small businesses have been approved, and the average loan is between 180,000 NIS and 200,000 NIS.

Tarek Bashir, Director of the Center for Jewish-Arab Economic Development's Business Unit and the Sulam Loan Fund determined that Arab businesses’ difficulty to obtain credit is also a result of cultural differences and that providing credit to Arab businesses is seen as a risky move by the banks. Tarek explained that, in addition, the most valuable asset in the process of requesting a loan is real-estate, however the banks do not consider real-estate in the Arab sector as a good guarantee since the banks are concerned that they will not be able to sell that property if needed, and also since the registration of Arab-owned land in the land registry office does not always represent the actual owner. Tarek then represented the Sulam Loan Fund and explained that it provides loans to Arab or joint Arab-Jewish existing or new businesses only, and is funded by the Olivestone Trust and the UJA. The Sulam Loan Fund is interested in providing loans to businesses with potential of growing, but is willing at the same time to “take some risks”. The Sulam Loan Fund’s credit committee meets with each and every businessperson individually. The Sulam Loan Fund provides a guarantee of 50% of the loan.

Panel Discussion II:

The Role of Accountants, Tax Advisors and Other Advisors in Obtaining Credit for Small Businesses

The panel discussion was moderated by Mr. Muhammad Bashir, an accountant, and included Mr. Jamal Majadla, Manager of MATI Meshulash; Ms. Kiram Baloum, Director of the Center for Jewish-Arab Economic Development's Women’s Unit and Ms. Diala Basel, Manager of the Minorities Sector at MATI Galil Maaravi. The panel discussed the importance of accountants, tax advisors and other advisors as the main link between their clients - small businesses looking for a loan - and the funds.

Jamal Majadla, Manager of MATI Meshulash, stressed that the population in the Arab sector has not yet reached full and correct business understanding, and thus the accountants must provide the necessary information and guidance to their clients. Unfortunately, Jamal continued, accountants in the Arab sector do not have enough access to information and continuing education programs which limits them in providing their clients with good advice, information and guidance. Jamal said that we all have the responsibility to promote this important issue and give accountants the opportunity to learn more about the funding options available to their clients, the business owners.

Diala Basel, Manager of the Minorities Sector at MATI Galil Maaravi, said that it is important for people interested in opening a business to first go through entrepreneurship and self-empowerment guidance before receiving a loan, including guidance in financial management and how to interact with banks. This way, Diala believes, the businessperson will know how to financially manage their own business.

Kiram Baloum, Director of the Center for Jewish-Arab Economic Development's Women’s Unit, said that the connection and ongoing relationship between a small business and the accountant that provides it with services should be a mutual goal. Kiram said that she is in favor of making accountants and tax advisors understand that it is in their own interest to have their client’s businesses thrive, since if these businesses thrive, the accountants will have more work to do, and thus more income. Therefore, Kiram explained, the accountants should be involved regularly and on an ongoing basis in the progress of the businesses they provide services to, and get involved if they come across any problems with these businesses along the way. The relationship between the accountants and their clients should be on a regular basis, and not only at the end of each year when tax reports are due.

The Panel members continued to discuss the different issues including that in the Arab sector the financial reports of businesses do not always reflect the reality as they tend to report losses in order to avoid paying taxes. The panel stressed the importance of making sure that the reports are accurate in order to increase businesses’ chances of receiving a loan.

Panel Discussion III:

“Business Branches” of the Mercantile-Discount Bank –

a New Way to Develop Businesses?

The panel discussion was moderated by Mr. Ahmad Wassel, Personal Financial Assistant to the Vice President, Head of the Retail Banking Division, Mercantile Bank and included Mr. Raik Jaraisi, Manager of the Nazareth Region, Senior Assistant to the CEO, Mercantile-Discount Bank; Mr. Jamil Amin, Manager of the Merkaz Hasharon branch, Mercantile-Discount Bank; Ms. Iman Kassis, business, employment and organizational consultant and coach and Mr. Tarek Abed, accountant and consultant to the Sulam Loan Fund.

Mr. Raik Jaraisi said that opening business branches will, with no doubt, serve businessmen in the business area of the branch. Lately, he said, a few branches of Mercantile Bank were opened in the North, either in the entrance of a village or in another convenient location in the village. Opening these branches did not only provide the local population with access to close baking services, but also developed the whole area around the location of the new branch, making it into a thriving financial district in the village. In Raik’s opinion, the business-economic development in a certain area is, many times, connected or even dependant on the existence of a bank branch in the area, which can provide banking services to local businesses. Raik stressed that Mercantile Bank is interested in opening more branches, and it has concrete plans to do so. He explained that Mercantile Bank sees Arab businessmen as a population that deserves to receive better services by the bank.

Mr. Jamil Amin talked about the branch he manages, which was opened 10 months ago. He also said that the Sulam Fund has the potential of growing if it will enlarge the amount of the loan it provides and/or the size of the guarantee it provides to the banks.

Mr. Tarek Abed explained that many businesspeople hear about the different funds via the banks, but it would be wise to publish more details about the Sulam Fund so that businessmen who are not clients of the Mercantile Bank will have access to information about Sulam. In addition, Tarek agreed that business branches will provide a better response and service to business customers.

Ms. Iman Kassis said that in the Arab community many people are not mobile so the existence of a bank branch in the villages is very important. She also said that the advantages of the Sulam Loan Fund are that it is directed at the Arab community and that the terms and conditions for receiving a loan are not as strict as in other funds. In addition, Iman said, the credit committee of Sulam treats each applicant with much of respect and humanity, which is a very important factor.

Mr. Helmi Kittani joined the discussion and stressed that business branches are a welcomed initiative and that their existence in a few locations seem to indicate a real change.

Through intensive reporting in the Arab press wider awareness was achieved through this conference regarding the problem of businesspeople from the Arab community to raise money in order to found their own businesses. It also directly served their interests by offering financial opportunities and networking. The Sulam Loan Fund has received very positive feedback on the event by those who attended. Since the conference a number of accountants and tax advisors who attended the conference contacted CJAED and are interested in referring some of their clients (small businesses) to the Sulam Loan Fund.