JERUSALEM (Reuters) – The Bank of Israel announced on Sunday that it would start offering repo transactions with supervised non-bank credit providers to increase the supply of credit to very small businesses that find it difficult to borrow due to of the COVID-19 crisis.
He said the new monetary tool would start working during the first week of January, with the aim of boosting the supply of credit to these companies beyond what is issued by the banks.
These non-bank providers, such as credit card companies and institutions, would be overseen by the Bank of Israel or the capital markets division of the finance ministry.
“In view of the crisis, lowering the cost of the source of finance for non-bank credit providers will create an incentive for them and help pass the general interest rate from the economy to the interest paid by small businesses. and micro enterprises. for the credit granted to them, ”the central bank said.
Throughout the coronavirus pandemic, the central bank has attempted to help small businesses through very low interest rate loans to banks, while allowing loan deferrals.
As part of the repo operations, the Bank of Israel will receive negotiable collateral from the credit card and other vendors, including government bills and bonds and corporate bonds under certain criteria.
The interest rate will be set at 0.1% per cent and subject to the granting of credit to small and micro-enterprises at an interest rate of up to the prime rate plus 1.3% per cent. and fixed at a rate of -0.1%.
The transactions will be for a period of 6 months, with the possibility of an additional period of 6 months under the same conditions, the central bank said.
Reporting by Steven Scheer; Editing by Raïssa Kasolowsky