The Chinese have a proverb, “If you give a man a fish, you feed him for a day. But if you give him a fishing rod, you feed him for a lifetime.”
The Jewish sage Maimonides put it this way: “A loan is better than charity, for it enables a man to help himself.”
That’s the main guiding principle behind Hebrew Free Loan societies across the world. The “free” part of the equation is based on the Torah’s prohibition against charging interest from a fellow Jew.
Working together under an umbrella organization, the Los Angeles-based International Association of Jewish Free Loans, these organizations offer interest-free emergency loans for a variety of needs, and donors know that their money will be recycled just like paper and plastic. As borrowers repay the loan, the donation’s influence grows exponentially.
|Yishai Assur was able to buy a specially equipped car with a loan from the Israel Free Loan Society.|
As Edward Cohen, chairman of the Israel Free Loan Association, put it, “We were founded like a mom-and-pop shop in 1990 with an initial donation of $20,000. Our current fund base of $36 million has been lent out many times over and continues to be recycled.”
In other words, the amount of money grows in terms of real impact because it is recycled again and again. For instance, an initial donation of $1,000 ultimately will be worth $10,000 if it helps 10 different people in succession. And that donation can be recycled not 10 but countless times.
The Jewish Standard spoke with Cohen in IFLA’s Jerusalem offices to learn more about the unusual model that drives this and other Hebrew Free Loan associations in the United States, Argentina, Australia, Brazil, and Canada. In New Jersey, there are two: the Hebrew Free Loan of New Jersey, out of Jewish Family Service of MetroWest in Florham Park, and the Paterson Hebrew Free Loan Association, based at the Fair Lawn office of Jewish Family Service.
The largest of these associations, IFLA, is now approaching its 50,000th loan. Remarkably, the rate of default is less than one-half percent, meaning that nearly every recipient eventually pays the loan back in full. A careful vetting process includes at least one face-to-face visit with the borrower and a financial check of the required guarantors.
Most of IFLA’s donations come from the United States – although a recent campaign seeks to identify Israeli sources – and Cohen notes that in 1998 the Torah Academy of Bergen County donated more than $1,000 of its tzedakah collection to the fund.
Since it began, IFLA has written checks amounting to more than $160 million. This year so far, more than six million shekels (about $1.5 million) have been distributed every month.
“Unfortunately, I don’t think we’ve scratched more than the surface in needs,” Cohen said.
One typical success story is Yishai Asur, who lost his leg after being hit by a car. The IFLA loan enabled his family to buy a specially equipped car for him. “We asked for half the amount we needed, but the IFLA gave us the whole thing,” Asur’s father said.
Laura Brody of Ridgewood, executive secretary of the Paterson Hebrew Free Loan Association (201-791-8395), said that the 115-year-old fund was established by a milliner, a grocer, and a peddler. They started with less than $400. “Over the past three years, we’ve loaned over $100,000, and so far this year, we’ve granted 13 loans ranging from $500 to $5,000,” she said.
Paterson Hebrew Free Loan serves Bergen and Passaic counties, and the endorsers (guarantors) must also be local, Brody said. Borrowers must be Jewish, but there are no other criteria. The fund’s default rate is similar to that of IFLA’s.
“I think people are appreciative and grateful, and we work with them to repay on a schedule they can manage, typically 18 to 20 months,” she added. “We are totally funded by annual and life membership dues, $25 and $200 respectively, as well as donations and corporate matching gifts.”
The Paterson association generally lends money for personal, educational, and medical expenses. Headed by President Richard Poulton, whose father and grandfather were active in the loan society, the association has a six-person loan committee and a 21-member board of directors.
“My grandfather was an endorser for some people and was president for 10 years, and my mother was the ‘girl in the office’ for about eight years before she retired,” Brody said. Her grandparents became involved when they wanted to help friends or relatives who came over from Europe to Paterson, then known as the Silk City.
Immigrants also provided the impetus to found IFLA. “When we started, it was during the big Russian and Ethiopian immigration and we focused on those populations,” Cohen said. “Then we started helping large families. For the first several years, those were our three categories.”
Today, about 30 percent of IFLA loans go to small businesses, which have to have four co-signers instead of two, and typically receive between 45,000 and 90,000 shekels.
IFLA also assists with education, medical issues, housing, family lifecycle events, personal emergencies, disaster, or accumulated debt, as well as helping single parents and prospective adoptive parents. The standard loan is 20,000 shekels ($5,500), and all recipients must be Israeli citizens eligible for the army (not necessarily Jewish) with a monthly income between about $750 and $3,800.
“The repayment period starts after one month, and the loan is 40 to 60 months depending on their capacity to pay,” Cohen said.
The process is unusually transparent.
“A donor opens a named loan account with us,” Cohen said. “When we lend it, the recipient knows where it’s coming from. We send each donor an annual report on who was lent money and how much – but not for what purpose. After a few years, you start seeing accumulation.”
The New York-based Trudy and Bob Gottesman Fund set up a challenge grant this year, pledging $1 million to raise $2 million. “We have raised $1.3 million so far, and I think we can reach our goal by the end of the year,” Cohen said.
Cohen says that possible new directions for IFLA include interest-free loans to charedi men pursuing higher education to enable them to earn a living, and supplemental interest-free loans for newlywed couples getting their first mortgage. Overall, about 20 percent of current recipients are charedi.
“The idea is to give direct and quick help,” he concluded. “If all the paperwork is done efficiently and everything checks out, the money can come in two weeks, or a month for small businesses.”