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Pushed into loan sharks’ pockets, many Arab Israelis are living on borrowed time

15 19 25

Say you come upon a golden business opportunity. A chance to buy raw materials for your small plastics manufacturing line at half the price. But there’s a catch. The supplier wants half the cash, some NIS 20,000 ($6,100), upfront.

Normally, you could just go to your local bank, explain the business opportunity on a loan application and borrow the sum with relatively little hassle. But as an Arab citizen of Israel, you are already familiar with the fact that the banks will classify your business as “risky” and deny the loan due to its small size and low turnover.

So you do what everybody else in the Arab community who needs a cash infusion does. You go to a loan shark, who usually operates out of what is advertised as a “change store.”

“It’s a small space, about 5 square meters (53 square feet). They are everywhere in Arab towns,” said Amal Urabi, an attorney who says his friend went through this exact process.

“He goes in, no one asks him about cash flow in the plastics business or why he needs the money. They arrange for him to return the money at relatively high interest rates, and that’s it. The criminal organizations hold huge amounts of cash and they serve as the alternative for banks for the Arab public,” Urabi said.

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With organized crime and violence reaching epidemic levels in Arab areas of the country, experts, officials and local activists say criminal groups are flourishing as they become the de facto financiers for a community that has essentially been abandoned by traditional regulated banks. Amal Urabi. (Courtesy)

Loans from such organizations often carry high interest rates and even higher consequences for unpaid loans. If a borrower misses a payment, they can expect a threatening phone call. If they fail to pay again, someone with a gun will stop by their house, making the threat more concrete. Miss again, and the loan shark will shoot a single bullet at the home as a final warning before they gun the delinquent borrower down, often in broad daylight in the middle of the street.

The mob loans are seen as a major part of skyrocketing murder rates in Arab towns. In 2020, at least 96 people in Arab Israeli communities were the victims of homicides, nearly double the number murdered in 2014. There have been 32 murders in the first four and a half months of 2021.

Prime Minister Benjamin Netanyahu, while campaigning for Arab votes ahead of March elections, promised to tackle the issue, and earlier this year presented a plan that would have set up a special committee, quickly dispatched officers to crack down on illegal weapons and put an extra NIS 100 million ($30 million) into adding police stations, welfare services and more. Longer-term parts of the plan would combat domestic violence, bolster economic empowerment and establish a new police division to deal with the crime issue.

“We have done this successfully against criminal organizations in Jewish society and we will do so successfully in Arab society as well,” he said during stump speeches.

But experts and community members say policymakers will need to look beyond policing and enforcement to tackle the problem. Only by dealing with the root issues underlying the crime wave will an effective solution be reached. Demonstrators protest the spread of violence and crime in Arab Israeli communities, in addition to alleged police neglect, in Umm al-Fahm on Friday, January 15, 2021 (courtesy: Yousef Jabareen)

“Local councils, municipal welfare bureaus, community centers — all need to offer parents and young people home economics workshops,” said Hussein Khalaila, a mortgage consultant in the northern Arab town of Majd al-Krum. “[They need to] teach about the dangers of the gray market, explain to people how to calculate the monthly repayment on a loan.”

Mortgaging the future

The dearth of aboveboard bank loans for Arabs is a well-known........

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