Most readers of this blog will have read either from me or other sources about the serial racism that faces Israeli Palestinians. They face housing shortages, inadequate funding of schools, poor municipal services, job discrimination, poor health services, etc.
But until lately, little was known about how Israeli Palestinians fared in the economic marketplace. Haaretz has published an important article about severe discrimination facing Israeli Palestinians in the financial sector. The reporter began the report with a transcript of a phone conversation between an officer of a branch of Bank Mizrahi and another bank official responsible for recruiting new customers. In the discussion between the two, the branch officer tells the woman who’s bringing new Israel Palestinian customers that she should save her breath and not bring them to her branch. The branch manager and assistant managers do not want these customers. They will tell any such person that they will not earn any interest on their accounts for at least six months after opening them.
The Haaretz reporter interviews banking officers from other banks who review the transcript and interpret it for her: when the branch refuses to offer a customer interest, they will also refuse to offer them other critical services like an ATM or credit cards. Any potential customer, when faced with such obstacles, will go elsewhere rather than face such curtailed customer service. In essence, Bank Mizrahi’s Kiryat Shmoneh branch was deliberately turning away potential customers because they weren’t Jewish.
This, of course, is illegal under Israeli law. So no bank can phrase their refusal in such a direct way. They have to justify it by saying, as the branch official does, that they had a bad financial history with Israeli Palestinians. Once one “took the money and ran!” The employee doesn’t specify how a customer could do this: unless she means that they took out a loan and defaulted. But she makes it seem like an Arab stole into the bank, grabbed money and fled like a bandit. Which would be characteristic of racist attitudes among of large percentage of the Israeli Jewish population.
In another passage from the article, a bank official tells the Haaretz journalist that Palestinians are simply a bad bet because they pose a greater financial risk than Jews. He magnanimously clarifies that it’s not a “genetic” fault, but rather due to Arab culture not having a “culture of payment.” In other words, Palestinians don’t take their financial obligations as seriously as Jews. He makes clear that he’s not including all Palestinians under this rubric, but alas, the chances of repayment of loans made to Palestinians is lower than to Jews, or so he claims.
Of course, he offers no evidence or statistics to prove this. It indicates that banking in Israel is not done by reason, logic or numbers, but based on biased assumptions and ingrained racist notions. There may be some who brag about the Israeli economic miracle, the Start-Up Nation, etc. But this article shows what its like down in the trenches, not in the pages of books boasting of Israel’s prowess in world business.
The truth is that a nation that offers inferior services to a large minority of its population solely based on their ethnicity is not a nation maximizing its economic potential. It is a nation held back by poisonous ideas that will inhibit growth and economic health.
Other statistics prove the inferior banking services available to Palestinians: there is far less competition among banks for the Palestinian customer. Only two banks serve the sector and neither are among Israel’s major financial institutions. Until this year, Bank Mizrahi had no branches in Palestinian communities. Other major Israeli banks consider the “Arab” sector to be an orphan. They see it as having little profit potential. Even if it did, they don’t understand the market and have no interest in learning about it.
There are fewer bank branches in Palestinian towns. There are fewer branch employees than in the average Jewish branch and those employees serve more customers. Monthly fees for checking accounts are almost double those of Jewish customers in major Israeli banks. The interest spreads in Arab banks are one-third higher than those of the larger banks serving Jewish clientèle. Service fees for Palestinian customers are much higher than for Jewish customers (see graph). Unlike in Jewish communities, banks serving the Palestinian sector offer no philanthropic support for local projects.
The typically racist Israeli banker, when asked to explain or defend this says with a straight face that “Arabs” don’t care about the cost of services. Much more important to them is that they receive “respect and personal service:”
They want to sit with their banker behind closed doors and share a cup of coffee. It’s their mentality.
This, he explains, is why Palestinians pay higher fees, because they demand more personal services than Jewish customers (who bank by phone or online and presumably incur lower costs for service). What he neglects is the fact that stiffing Palestinians with high service fees is the ultimate in disrespecting them.
Another banking consultant discounts the possibility that discrimination is at play among Israeli banks toward this market. She says she knows of no “overt policy of discrimination by any bank.” Of course no bank has such a stated policy. They don’t need to. In a sophisticated society that is nevertheless racist, they don’t need written policies that penalize minority customers. Discrimination is much more discreet and nuanced than that.
The argument that Palestinians pose a higher risk to banks than Jews is not borne out by statistics. The rate of default among the Palestinian population is comparable to that of the Jewish population. Further, the poor financial services offered to Palestinians create a vicious circle by which they cannot get credit, cannot open new businesses, cannot amass wealth, which in turn ensures they continuation of the economic stagnation and poverty with which this sector is afflicted. The truth is that Israel as a nation doesn’t care about the fate of its minorities. They fend for themselves. Do the best they can. But Israeli economic and financial institutions don’t reach out a hand to help. They don’t do so either out of altruistic or capitalistic motives.
At a Knesset hearing on the banking sector, one Jewish MK asked how it was possible that there was this level of poor service and discrimination against Palestinians. Before he could finish his question another Jewish MK interrupted him, saying:
As usual, they screw the Arabs.
Parallels to financial sector discrimination in the U.S. are rife. We certainly have some similar problems. But we have laws against such racist treatment (a practice known in banking circles as “redlining”) and punishments meted out to companies that violate them. There are NGOs who organize “stings” in which they test the responses by bank personnel to minority customers. Those which fail are shamed when the results are made public. Congressional legislation also forces banks to channel some of their profits back into minority communities to support local NGOs and economic projects. Unfortunately, almost none of this happens in Israel because racism against Israel’s minorities is much deeper ingrained there than it is here.