Ofek Cooperative Submits Application to Bank of Israel for Banking License
Social cooperative Ofek has officially applied for a banking license. If approved, it will become Israel's first non-profit bank, targeting households and small businesses.
The social cooperative Ofek has taken a major step toward becoming a fully-fledged financial institution. More than a decade after its establishment as a non-profit credit union designed to offer an alternative to commercial banks, Ofek has submitted an official application to the Bank of Israel for a banking license.
If approved, Ofek will operate as a non-profit bank and will not distribute dividends. According to the business plan, all revenues and surpluses will be channeled back to its members through interest on deposits, lower fees, and enhanced services. If authorized, this will be the first banking license granted in Israel in four years, since Nir Zuk's Esh Bank received its license in late 2022.
Cooperative Growth and the Ogen Merger
Ofek was founded in 2014 as a cooperative credit union. Over the years, it has attracted approximately 15,000 members who purchased membership shares for 1,000 NIS each, contributing an estimated 20 million NIS. While a significant portion of this capital was directed toward building technological infrastructure, Ofek struggled to raise the capital required to offer deposit and credit services and complete the licensing process.
To overcome these hurdles, Ofek merged in March last year with Ogen, a non-profit social loan group that has operated for over 30 years, funded primarily by donations. Ogen provides low-interest loans and financial mentoring to households, small businesses, and non-profits that struggle to secure credit from traditional banks.
Ofek's CEO, attorney Tom Dromi Hakim, previously explained that the merger with Ogen was essential for survival:
"Without this move, Ofek would not have been able to present the capital required to develop banking systems and meet regulatory licensing demands."
Under the merger agreement, Ogen agreed to provide Ofek with a credit line of up to 100 million NIS, alongside an immediate cash injection of 14 million NIS. Ogen has set a target to reach 792 million NIS in equity by the end of 2026.
Liquidity Challenges and the Tria Crisis
Ofek's journey has not been without difficulties. One of the primary challenges stemmed from its partnership with the peer-to-peer lending platform Tria. Ofek members invested over 200 million NIS through Tria. In 2023, when Tria suffered a severe liquidity crisis, many members faced difficulties withdrawing their funds. Although Ofek was not legally responsible for returning the loans, the incident damaged member trust and complicated the cooperative's efforts to scale its financial operations.
