SparkIL provides Israel's small business owners a much-needed boost

Jamal Asad, a laundromat owner residing in Kfar Beit Jaan, considered going into a line of work popular in his Druze community, such as security or agriculture. Instead, he chose to launch his own business given the rapidly growing number of tzimmers (bed and breakfasts) popping up in Israel’s pastoral north.

After successfully running the laundromat for seven years, Asad realized he needed more capital to meet the growing needs of his client base. It was then that his business consultant made him aware of SparkIL, the first peer-to-peer lending platform for supporting Israeli small businesses.

“My business keeps getting better every year,” he said proudly. “I’m getting more business and I’m serving more tzimmers, but I need more equipment — the washers and dryers I currently have can’t possibly satisfy all the clients that come to me. So this loan came right in time.”

Asked how he feels as a Druze receiving a loan from a Jewish-founded organization with many Jewish supporters, Asad is flummoxed by the question.

“Why does it matter?” he said. “A human is a human. In Israel, we’re all in this together, regardless of what religion you are or what language we speak. I’m grateful to SparkIL for fostering this very human and universal connection between us all.”

Na’ama Ore, CEO of SparkIL, said the recently launched platform “is a new way to connect, people to people. Social-minded lenders can help a small business in need, and the business owners have access to a network of lenders who want to help” — all while cultivating a sense of solidarity between Israeli business owners and global lenders who are not only supporting their journey, but in essence taking the journey with them.

Through SparkIL, a modest investment can make a substantial and long-term impact, she explained.

“A single loan of $25 could have countless ripple effects over the years and help dozens of small businesses in the process,” Ore said.

Nurturing mushrooms — and entrepreneurs

David Elimelech doesn’t grow your average mushrooms. Thick, robust bushels of elm oyster mushrooms, vibrant pink oyster mushrooms that look like they could be mistaken for coral reefs, and black pearl oyster mushrooms with substantive, meaty stems are just a few of the varieties Elimelech grows himself.

“I started experimenting at home and began growing mushrooms,” he said. “The taste, health benefits and different combinations of what’s possible to do with mushrooms always fascinated me. I knew I wanted to continue to do this but on a larger scale.”

The young entrepreneur is only at the start of his commercial journey after going into business immediately after completing his army service two years ago. The challenges to getting such a business off the ground are steep, but Elimelech is undeterred.

Based in southern Israel only a few miles from the Gaza border, he understands that access to resources and a consumer base is not the same as living in the center of the country. Yet he’s still able to make it work.

Together with his girlfriend, Jennifer, the two are responsible for the entire mushroom cultivation process from farm to table. Today, he sells close to 400 kilos of mushrooms a month, but still needs help meeting the growing demand.

Thanks to SparkIL, Elimelech was able to expand his inventory, buy more equipment and reinforce his operations.

As such, Elimelech’s full loan of $26,500 was completely funded by lenders from Israel and abroad, along with a 1:1 match from a philanthropic fund.

Each micro-lender has a singular value in common: the desire to make an impact on and connect to an Israeli society that speaks to their aspirations, passions and values.

As for Elimelech, he is grateful for the support and is keeping his head close to the ground (literally) as he tends to his mushrooms, and plans to stay out of trouble. His impoverished neighborhood in Ashkelon is home to much violence and corruption, and during the last war with Gaza, a rocket fell 200 meters from his home.

“It doesn’t bother me,” he said of life surrounded by violence. “I’ve had friends who’ve chosen the easier path in life, and then got into trouble with the law and regretted that later. I chose a different way. I grew up without a father and in many ways, had to raise myself.”

Rather than watch things burn, Elimelech instead has opted to help things grow.

“It’s therapeutic, actually,” he said. “To nurture these mushrooms by hand and watch them thrive into something magnificent feels great.”

Despite taking the responsible path in life, the banks in Israel made it difficult to forge ahead. Thankfully, when the bank turned him down, SparkIL – and a community of social lenders – was there for him instead.

Elimelech, though, is only one of many Israelis struggling with a challenging environment for small businesses.

While Israel may be famed for hi-tech companies lining Tel Aviv’s shore, in many pockets of the country small businesses are faltering, especially after the corona pandemic.

According to a survey conducted by the Israel Democracy Institute, 40,000 of Israel’s half a million small businesses closed during the pandemic.

“The research reveals the gap in income security between the self-employed and salaried workers,” Dafna Aviram- Nitzan, head of the IDI’s Center for Governance and Economy, told Haaretz last year. “The self-employed sustained a considerably sharper hit to employment and revenue than salaried workers. The corona pandemic illustrates how most salaried workers have relative job stability, while the self-employed are more vulnerable in terms of their revenue as well as their employment.”

A recent study published by the Economy Ministry found that in 2021, the scope of the credit to small businesses was lower than the corresponding credit in 2019, before the pandemic.

Moreover, not all businesses in Israel are treated equally. By the end of 2020, credit to large businesses earning more than NIS 100 million increased by 27% compared with 2019, while small and medium-sized businesses’ credit increased by only 4%

As such, SparkIL hopes to target business owners like Elimelech – entrepreneurs with compelling ideas and an ambitious spirit who lack access to capital and simply need a bit more financial backing to feel secure in their venture.

How does SparkIL work?

SparkIL, established in partnership by The Jewish Agency for Israel and the Ogen Group, provides a wide variety of businesses for lenders to support directly through a zero-interest loan. For as little as $25, a lender can participate in funding a loan based on their social values and a connection they see with the borrower. The borrowers all fall into one of three points of impact: people, place or purpose, i.e. Ethiopian Israelis, Haredim, Israeli Arabs, LGBTQ individuals, new immigrants , people with disabilities, and others; cities and communities in Israel’s periphery; or business owners championing high-impact areas like coexistence, art and culture, education, and the environment.

The borrowers have five years to pay back the loan and lenders receive monthly repayments to their SparkIL account for the duration of this period. As the lenders’ balances grow, they are given the option to reinvest in another business or withdraw their funds.

As a devout Zionist, making a loan through SparkIL was a no-brainer for Tulsa, Oklahoma-based venture capitalist Michael Basch.

“I wanted to be intentional about where my money was going, and I knew it had to be Israel-focused,” Basch said.

He chose to lend to a new immigrant from France, Sarah Amsallem, who works as a health coach with her own studio in Tel Aviv.

“My support is around women’s health, and given everything happening in the women’s health space in the US, I wanted to try and put more of my personal dollars to addressing causes around women’s health broadly speaking,” said Basch. “I hope the money both helps the company be viable, grow, and help the founder to be a successful entrepreneur, as well as provide women quality guidance on their health journey.”

‘Everything came down like a house of cards’

Ziva Mizrachi, owner of a jewelry store called Hoshen in Jerusalem, can certainly speak to how, like Amsallem, SparkIL supports female-led businesses.

The single mother of two kids has been the owner of the iconic Jerusalem establishment for 17 years, and considers the store her “baby.”

The shop has been a big tourist destination for the city, and is known as the place to buy locally sourced art in Israel. Mizrachi recently added a line of products made by people on the margins of society, specifically prisoners and people with disabilities.

And while the store has enjoyed its almost institution-like status in the German Colony neighborhood, recent events have made business a challenge.

“Over time, there was less foot traffic in the German Colony because of the success of Mamilla and the First Station,” she lamented. “Then COVID happened, and everything came down like a house of cards.”

Mizrachi received some government assistance due to the pandemic, but by the time she reopened her doors to greet customers in person, she felt that all the momentum she gained over the past decades evaporated.

“I didn’t want to give up on the store,” she said. “This is my baby. Even if I don’t make millions keeping it open, I still look forward to coming in here every day.”

The nearly $9,000 Mizrachi raised through SparkIL gave the store the shot in the arm it needed. With the newly invested capital, she hopes to expand the store inventory and reach out to more unique artists.

“As someone who strongly believes in community empowerment, SparkIL touched every aspect of my personality,” she said. “Finding an organization that understands the power of building up small businesses is a rare find, and I hope other companies are able to thrive thanks to their help.”  ■