Increasing number of Israeli entrepreneurs focusing on social justice

TEL AVIV (JTA) — Capitalism in pursuit of social justice.

The notion is becoming more common in Israel as a new generation of entrepreneurs and innovators in the fields of high-tech, industry and real estate is delving into philanthropy.

“The culture of venture capital and the startup nation also transfers into innovation in the field of philanthropy,” Andres Spokoiny, president of the Jewish Funders Network, said in a telephone interview ahead of the Jewish Funders Network International Conference that was held here last week. “One of the goals of the conference is to foster networking among highly empowered, highly independent individuals.”

Cecile Blilious, who comes from the high-tech world, is a managing partner at Impact First Investments and one of the new philanthropists. Her company funds enterprises that are economically viable and have a positive social impact.

Blilious also helped found the Al-Bawader private equity fund, which invests exclusively in businesses in Arab-Israeli communities, and is a board member of Neurotech Solutions, which developed a test that can screen young children and adults for attention deficit hyperactivity disorder.

“This is a social business product that can be harnessed not just to make money but to make the world a better place,” Blilious said in an interview during lunch break between sessions, “and it is coming out of Israel. That is the best hasbara [public relations] possible.”

Following a session titled “Developing a Social Capital Market in Israel,” Bank Hapoalim Chairman Yair Seroussi told JTA that his bank spends 50 million shekels (about $13.4 million) annually on philanthropic activities. They include sending a fleet of mobile libraries to poor neighborhoods, facilitating computer access in public schools and a nationwide program in which thousands of Bank Hapoalim employees volunteer every year to teach 11th-graders how to manage their personal finances.

“We are sensitive to what is happening in Israeli society and we are reacting to it,” Seroussi said.

Particularly striking at the conference was the large contingent of Israeli entrepreneurs, venture capitalists and high-tech innovators focused on tikkun olam, repairing the world, using the same business know-how that got more than 60 Israeli companies listed on the Nasdaq — more than any country outside North America and China.

Chanoch Barkat, a former venture capitalist with Apax Partners Israel, is doing just that. His Dualis Social Venture Fund provides counseling and financing to a chain of five restaurants – two in Tel Aviv and one each in Ra’anana, Yahud and Beersheva – that employs high school dropouts.

In an interview, Barkat acknowledged the restaurants are not as profitable as other food establishments, but said they are self-sustaining. By teaching high-risk teenagers such basic business skills as punctuality and commitment, he said, the restaurants save the state millions of dollars in crime prevention, rehabilitation and welfare costs.

“I believe there is a growing opportunity for developing new models in the world of social change by adopting and implementing tools from the world of finance,” Barkat said.

Forbes magazine’s 2012 list of billionaires listed 13 Israelis, including Shari Arison, who owns a controlling share in Bank Hapoalim and Housing and Construction, one of Israel’s largest building firms; Nochi Dankner, who has holdings in some of Israel’s largest industries and financial institutions; and Idan Ofer, who owns the Zim shipping concern and has stakes in aviation, high-tech, private equity, real estate and media. All are members of a growing cadre of high-powered Israeli philanthropists.

Less prominent Israeli millionaires, who numbered more than 10,000 in 2010, according to a Merrill Lynch report, also are increasing their involvement in philanthropic pursuits.

Yet individuals and corporations in Israel are still lagging behind their counterparts in America. Israeli philanthropy constitutes about 0.74 percent of the GDP, compared to 2.1 percent in the United States, according to a recent study by Hillel Schmid, head of the Center for the Study of Philanthropy at the Hebrew University.

Schmid said that Israelis still tend to expect the state to solve social ills, while American philanthropists understand that one of the prices of smaller government is the need for more voluntary activity to fill the void. With Israelis paying higher taxes than Americans, serving in the Israel Defense Forces and doing reserve service, many believe they have “done enough” for their country, according to Schmid.

Corruption stories also have made Israelis suspicious of nonprofits, he added.

Also seen as dampening enthusiasm for Israeli philanthropy: The annual total for charitable donations eligible for a 35 percent tax deduction is a maximum of 4.5 million shekels ($1.2 million) a year. Plus, only some 4,000 of the country’s 30,000 nonprofits are recognized for tax-deduction purposes.

Despite the hurdles, Israeli philanthropy will continue to grow, predicts Ahuva Yanai, CEO of Matan-Investing in the Community, which receives funding from Arison, Dankner and others.

And she says that growth will mean a continued increase in the number of projects with similar goals, such as leadership and afterschool educational programs.

“People are going to have to learn to cooperate and pool resources,” Yanai said in an interview ahead of the conference. “And that means putting aside your ego, giving up control over every little aspect of the operation and not trying to reinvent the wheel.”