A Recovery and Economic Development Plan for Northern Israel: The Day After, II

Description

Following up from the first Financial Innovations Lab held in Santa Monica, which examined a large array of financing options for Northern Israel's post-war recovery, a diverse group of financial, legal and philanthropic experts met in New York to discuss implementation of the two top solutions: development of a bond authority for infrastructure and public-private projects, and expansion of the KIEDF Small Business Revolving Loan Fund Model.

A representative from the Israeli Finance Ministry stated that many existing and statutorily approved infrastructure and business finance projects remain unexecuted due to budgetary constraints.

The group decided that a Northern Israel Bond Authority would generate capital to develop these promising projects for the region. Financial and legal experts suggested that the bonds may be issued by a U.S. conduit in partnership with an Israeli project sponsor.

The group explored several financing options. They also determined that adding a layer of credit enhancement to any financing model would decrease risk and increase the likelihood of investment. With sufficient legal support oversight and evaluation, the implementation of the bond authority could become a reality in the coming year.

Participants discussed the success of the KIEDF Revolving Loan Fund model for small-business growth. Through the fund, KIEDF puts philanthropic dollars to work in the private sector, providing small-business, micro-enterprise and microfinance loans to entrepreneurs. Because the model is already effective, little discussion on improvements or challenges occurred during this session. Rather, participants encouraged KIEDF to continue and expand its work. The group thought particular emphasis should be given to small businesses that, because of the war, currently have restricted bank accounts.

Lab participants suggested that the small-business loans provided by KIEDF, and small-business loans in general, be securitized in a targeted collateralized loan obligation (CLO). A targeted Northern Israel CLO would allow KIEDF and banks to go one step further in lending, providing further liquidity in the constrained small-business credit sector.

The lab concluded with a discussion of next steps for implementation of the bond authority and the Northern Israel CLO. A report with the findings and next steps will be released in the coming months.