Jewish Loan Group: Micro-Lending For 120 Years

The Hebrew Free Loan Society, which was formed in 1892 to assist indigent Jewish immigrants here, marked a milestone recently — it has provided more than $220 million in interest-free loans, on a nonsectarian basis, to more than 865,000 borrowers. In the last fiscal year, the total was almost $11.5 million, to over 1,430 borrowers. The default rate, even during the current recession, remains below 1 percent. Executive Director Shana Novick, a former Park Avenue attorney and resident counsel at the Ford Foundation who joined HFLS in 1995, talks about the Society’s work.

Q: There is a wide perception that Jews have “made it” in the United States. Why is a free loan society still needed now?

A: While the Jewish community, by and large, has “made it” economically, our community still includes many who are just getting by or actually living within the poverty guidelines. Among the most vulnerable are immigrants from the former Soviet Union, now 20 percent of New York City’s Jewish population, and large families of modest means within the Orthodox community. For both groups, a relatively small amount of interest-free credit can have an enormous impact.

How has HFLS changed since it was founded 120 years ago?

Our mission remains the same. A century ago, however, when most Jews were poor immigrants with limited education, our “target population” was virtually the entire Jewish community. Today our focus is those pockets of economic vulnerability. A century ago we made thousands of “microloans” for business purposes, helping borrowers who had no source of capital other than loan sharks, stock a pushcart or purchase a sewing machine. Today we position our micro-enterprise borrowers for success in a developed economy by offering core business training and help with creating a business plan in addition to providing interest-free credit.

Micro-loans are the economic success story of the last generation. What prompted groups like HFLS, or its shtetl predecessors, to make these sorts of loans a long time ago?

HFLS represents a centuries-old, profoundly Jewish response to financial need, going back to the Bible. This would explain why Eastern European Jewish communities created interest-free loan societies, or G’machs (for “Gemilus Chesed”). The G’mach became a standard institution in Jewish communities large and small, and was then transplanted to America at the end of the 19th century.

Do people helped by you who go on to become wealthy remember HFLS with their pocketbooks?

In past decades, we received many bequests from borrowers who took loans early in the 20th century and went on to become wealthy. A current board member, one of our largest donors over the past 20 years, is the grandchild of a borrower. We offer our current borrowers the opportunity to “pay back” once they have completed repayment of their loans, and a substantial percentage do become donors. This is why you see so many Russian names in the donor section of our annual reports.

What’s the most unusual need for which HFLS has loaned money?

We have created an Adoption Loan Program for Jewish couples or singles seeking to create a Jewish family through adoption. Adoption is enormously expensive, now costing anywhere from $20,000 to $40,000. Our program targets those who can afford to raise a child but who have trouble paying steep adoption expenses. Many adoptive parents exhaust their limited savings on fertility treatment, and even incur high-interest credit card debt. Our program makes creating a Jewish family through adoption affordable.

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