Bank of Israel To Open Nearly $300M Credit Line to Diamantaires

Finance and Trade
15/02/2018 08:57

The Bank of Israel has agreed to open a $285 million (Nis 1 billion) credit line to diamond traders in the form of government-backed loans in response to calls from the industry to alleviate a credit crunch that is hurting their competitiveness. Globes reports that a committee for examining credit and growth in the diamond sector, led by Ministry of Economy and Industry director deputy director general Naama Kaufman-Fass, recommended a special aid track for diamond traders in the framework of the fund for small and medium-sized businesses that will make to possible to provide diamond traders with NIS 1 billion in credit, financing for overseas conferences aimed at encouraging buyers to come to Israel, and state aid in founding a polishing facility for large stones.

Reporting on discussions last month between the Director of the Israel Tax Authority and the Supervisor of Banks, the Bank of Israel wrote, "In recent years, the diamond industry has encountered difficulties in acting vis-à-vis the banking system, due to a global deterioration in the industry, as well as due to an increase in compliance risk in general, and in the industry in particular (the Underground Bank case, the determination of tax offenses as predicate offenses regarding money laundering, financial statements without a flawless professional opinion from an accountant, and more). This has been reflected in the decline of bank credit to the diamond industry, and there were even banks that completely stopped financing the industry."

The committee found that 70% of diamond sector businesses with turnovers of up to $3 million were suffering from a credit crunch that resulted mainly from their dependence on banks, which classify activity in the diamond sector as high-risk, among other things due to the lack of adequate collateral for credit. This perception has led to a decline in total lending to the Israeli trade from $2.5 billion in 2008 to about $1 billion last year, the committee said in its report. Rapaport News clarifies that the government fund will back companies’ borrowing, meaning that if they fail to repay a loan to a bank, the state will pay. Globes adds that, according to Ministry of Economy and Industry figures, Israeli diamond exports totaled $28 billion in 2016, amounting to 13% of Israel's exports. Central Bureau of Statistics figures indicate that the diamond industry employs 9,500 workers.