In a complaint filed with the Capital Market Authority, which could shake up one of the most important economic institutions in the ultra-Orthodox community, it is claimed that the deposits of ultra-Orthodox families in the Central Savings Bank are several times lower than the loans it promises to provide.
According to a report by Shahar Ilan in Calcalist, The complaint expressed concern that the "Central GMA" - officially called GMA Beit Israel - would not be able to meet its far-reaching obligations.
According to the report in Calcalist, the former Capital Market Commissioner, Prof. Oded Sarig, wrote in an opinion piece on the central GMA: "The stability problem is particularly serious in the central program, as a household that joined the program expects to receive a loan 8.33 times the amount of its deposits into the program. The end of the central program is expected: the inability to meet the expectations of participating households.".
Investigating accountant Ofer Alkalai believes in a supplementary opinion: "There is a real concern that the association's financial statements are misleading. The statements present assets worth one billion shekels," he writes, referring to loans, "without presenting the association's liability for the funds received.... The association does not present in a clear and simple manner, as it should, the risks involved in its activities.".
Like Sarig, Alkalai adds: "There is a concern that the association will not be able to give all savers loans in the future.".
The Deputy Legal Advisor of the Capital Market Authority, Attorney Eyal Ben Yeshaya, wrote in response to the opinion: "Due to the obligation of confidentiality, we do not intend to address the allegations against this or that GMAH institution." However, of course, "we do not intend to ignore the opinions of Prof. Oded Sarig and CPA Ofer Alkalai, and these will be examined by us in a substantive and in-depth manner befitting professional documents written by two leading professionals in their fields.".
According to the report in Calcalist, the opinion on the "central GMA" was prepared by Sarig and Alkalai at the invitation of solar energy entrepreneur and social activist Israel Kreuzer and his son, data scientist Or Rafel-Kreuzer. For the past two years, the two have also been leading a fight against irregularities in the Agudat Israel independent education network.
Just as the Kreuzer family uses the shortcomings in independent education to combat irregularities in Haredi education as a whole, they hope that the opinions on the housing associations will serve as leverage to correct the business model of all housing associations, many of which are trying to handle Haredi housing.
According to the Central Gamach website, it "was established by the Elders of Israel to solve the plight of child marriage in the Haredi sector. The Central Gamach's solution allows every family to prepare in advance and marry calmly and respectfully. The association is managed by a professional team, and is regularly supervised by a team of senior economists, under the close guidance of the Elders of Israel Shlita.".
According to the website, 53,000 families save in the GMAH. For halachic reasons of concern about the prohibition of interest, the GMAH deposits are defined as donations from the parents, and the loans and grants are given to the children. This separates the deposit from the consideration.
By 2024, the GMAH had given loans totaling 3.3 billion shekels. About two-thirds of this amount has already been repaid.
Sarig writes in the opinion that the main activity of the GMAH, according to its reports, is within the framework of what is defined as a "parents' program, and that 93% of the donations, which are essentially deposits, were given within the framework of this program.".
'The 'Parent's Plan' is based on the principle that parents make a monthly deposit in units of 30-50 shekels, which is defined as a donation. In return, the child will receive an interest-free loan of 40,000 shekels per unit as equity for the apartment, and will also receive a grant in the form of an exemption from the last six loan payments.
Sarig clarifies: "The loans granted by the Central Bank of Israel are in amounts much higher than the amounts of the deposits. Thus, a household eligible for one loan unit accumulates 4,800 shekels in ten years of deposit but is entitled to receive a loan in the amount of 40,000 shekels. In other words, the household is entitled to receive a loan that is 8.33 times larger than the amount accumulated.".
Sarig believes that "in the absence of its own sources of income, the Central Government Housing Fund relies on receipts from late entrants to finance payments to early entrants. In light of these data, and to the best of my professional judgment, there is a serious concern that sooner or later, the Central Government Housing Fund will not be able to provide the loans it promised to the program's participants. In other words, the end of the central program is imminent: an inability to meet the expectations of participating households.".
Sarig explains why, in his opinion, the collapse has not yet happened: "This is a young institution. The Central Housing Fund began operating in 2003. The programs for financing the purchase of apartments offered by the Housing Fund mainly mature after about twenty years. When the descendants of depositors eligible for loans reach their retirement age, the Central Housing Fund provides loans to finance the purchase of apartments. Therefore, until 2023 it is mainly an accumulation of deposits. In 2023, providing loans to the descendants of depositors began to constitute a central component of the activity, and therefore now the ability of the Central Housing Fund's business model to deliver on what was promised will begin to be tested in practice.".
Sarig's opinion indicates that the difficulties have already begun: "Until 2022, the volume of loans that the Central Bank of Israel provided each year was lower than the volume of annual receipts. In 2023, for the first time, loans were granted in a larger volume, NIS 95 million from the accumulated deposits. NIS 242 million in loans compared to NIS 147 million in deposits.".
He adds: "To the best of my professional understanding, due to the huge gap between the amount of the guaranteed loans and the total payments in the parents' plan, there is a high probability that the central government will not be able to meet its obligations over time.".
Sarig emphasizes: "The data from the financial statements of the Central Housing Fund raises a fundamental concern that a large number of Haredi households will face a broken trough in the coming years when they come to purchase apartments for their descendants, a concern that was not and is not brought to the attention of the public of households that have joined and are joining the Central Housing Fund's parents' program. In addition, if the households that joined the Central Housing Fund to finance the purchase of housing for their descendants decide to sell their units, it is highly likely that they will not be able to get back the amounts they have saved so far.".
Attached to Sarig's opinion is Alkalai's opinion, which analyzes the reports of the Central Savings Bank - and it states: "There is a concern that the association will not be able to give all savers loans in the future in the absence of free cash flow, nor will it be able to return their money to them, since some has been taken for the expenses of managing the activity, and some cash flow has already been given to others. The risks inherent in the association's activities, in light of the scope of its members and the nature of its activities, require, in my opinion, close supervision by the regulators.".
The Central Bank's response: "There are no loans given beyond actual capacity""
The Central Supreme Court responded in a letter sent by its attorneys to the opinions of Oded Sarig and Ofer Alkalai. "The opinions you sent for our review are plagued with serious professional failures, the result of a work method that marks target circles around a predetermined arrow, without a serious and thorough examination of the obvious facts, and without any examination with the subjects of the opinions, despite extremely serious conclusions that require extreme caution in their distribution and publication.".
The GMA claims: "The economic model is that parents who make a donation to the GMA entitle their descendants to receive a loan for wedding purposes at a certain date, which they are obligated to repay in full. Each GMA loan is supposed to be repaid in full within about a decade and return to equity. The loans to descendants are given in accordance with an actuarial balance between deposits and loans, and this from existing balances. In accordance with its economic plan, the GMA will reach economic balance in the near future and will be able to lend only from equity combined with the repayments of previous loans.".
The GMA further claims: "In addition, the GMA can find alternative sources for providing loans, such as donations that are not 'qualifying donations' or loans from external sources. In any case, The GMA has no obligation to provide loans if there are no sources to provide the loans. So that the provision of loans does not depend on new donations or the constant expansion of the GMAH.".
According to the Capital Market Authority, "the plan of the central Capital Market Authority was prepared and supervised by senior professionals, including first-rate economists. The Capital Market Authority's financial reports are prepared according to generally accepted accounting procedures. The Capital Market Authority received all the documents and calculation files, held in-depth meetings with the Capital Market Authority's management, together with an actuary on their behalf, and conducted a professional review of the model. All of this data proves the transparency and robustness of the Capital Market Authority.".
The GMA also claims that "there is no basis for CPA Ofer Alkalai's claim that there is an independent promise or obligation to provide future loans. The GMA is not legally or halachically obligated to provide loans. The GMA's economic model is that the donors are the parents. All donors are aware that there is no personal contractual obligation to receive a loan, but that the provision of loans is subject to the existence of sufficient financial sources.".
The General Assembly also stated: "There are no issues, according to CPA Alkalai, that in 2023 loans were given in an amount exceeding the amount of deposits by NIS 90 million: this is not a deficit but an interannual balance. The balance in previous years allowed loans to be given in a higher amount in a particular year, as part of managing the actuarial balance. There are no loans given beyond actual capacity, and there is no use of money that does not exist.".
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