Ganz Calls to Establish $2.25 Billion Credit Fund

The Israeli diamond industry is seeking the backing of the Bank of Israel in its bid to lower the cost of credit. In a letter to the Governor of the Bank of Israel, Israel Diamond Manufacturers Association President Moti Ganz proposed the establishment of a $2.25 billion credit fund for the diamond industry.

Ganz suggested to Governor Prof. Stanley Fischer in the letter sent this week that the bank forms the fund out of the central bank’s foreign exchange surplus and make the credit available to diamantaires through the banks financing the industry – Union Bank, Israel Discount Bank, Bank Leumi, First International Bank and Mizrahi Tefahot Bank.

Diamantaires would continue to pay individualized margins according to the company’s level of risk, but would save the cost of raising the funds (LIBOR).

In addition, Ganz asked Fischer to instruct the banks to reduce the margins charged to diamantaires to the level of January 2008 – between 1 and 3 percent. He wrote that since the beginning of the financial crisis the banks have raised margins unilaterally by 0.25 to 1 percent. “This increase is a major burden to the industry,” Ganz wrote.

Since the start of the financial crisis, Ganz wrote, the Israeli banks have seriously reduced the credit available to the industry.

“The Israeli diamond industry’s total debt to the banks is about $2.3 billion, a level it has maintained for several years despite an impressive growth in exports,” wrote Ganz. He added that the number of bankruptcies in the industry is minimal, not exceeding more than one or two a year. This, he stated, attests to the financial strength of the industry and its stability.

Ganz added that the diamond industry is the largest export industry in Israel, with polished exports in 2007 reaching over $7 billion (about 20% of the country’s total industrial exports), and with a net turnover of $20 billion.

“We are the only industry in Israel that has not leveraged itself, has not issued bonds to the detriment of the economy,” Ganz wrote, adding that the diamond industry was not a cause of the current economic crisis and the fore should not be made to pay the price of errors caused by others.