Israel’s highly concentrated banking system systematically excludes hundreds of thousands of families, small businesses, and nonprofits – but a new social banking model now within reach could fundamentally reshape how credit, deposits, and financial services are delivered across the country, according to Ogen CEO Sagi Balasha.
Speaking Thursday at the Ogen Conference in Tel Aviv, Balasha presented a stark diagnosis of Israel’s banking landscape and a clear roadmap toward the establishment of what he described as Israel’s first true social bank – an institution designed specifically to serve populations that the commercial banking system consistently leaves behind.
Held against the backdrop of more than two years of sustained conflict, economic strain, and post-war recovery efforts, the Ogen Conference 2025 brought together policymakers, regulators, municipal leaders, economists, philanthropists, and social entrepreneurs to examine how Israel’s social economy can recover and adapt. Central to those discussions was the question of whether Israel’s financial system, as currently structured, is equipped to support long-term national resilience beyond Israel’s economic core.
Israel’s banking sector, Balasha said, is among the most concentrated in the developed world.
“In the United States there are about 4,500 banks – roughly one bank for every 77,000 people,” he told the audience. “In Israel, there are eight banks. That’s one bank for every 1.2 million people.”
This extreme concentration, he argued, directly shapes who the system ultimately serves.
“Less competition means competition is focused on stronger populations – the upper classes and large businesses – and much less on families and small businesses,” Balasha said.
He pointed to the scale of financial exclusion as evidence of a structural problem rather than a marginal one. Roughly half a million Israelis lack a bank account altogether, while another million receive only partial banking services. The groups most affected, he said, include middle- and lower-income households, small businesses – particularly in Israel’s geographic periphery – and nonprofit organizations.
“For all of these groups, you need a social bank,” Balasha said.
Balasha was careful to frame his critique not as an attack on Israel’s commercial banks, but on the incentive structure under which they operate.
“If I were a bank manager, I would need to generate profits for investors. That’s the job,” he said. “But a social bank operates with a different objective.”
That objective, he explained, is impact rather than dividends. Without pressure to distribute profits to shareholders, a social bank can reinvest capital directly into communities that traditional banks view as marginal or higher risk.
“I don’t need to distribute profits,” Balasha said. “I can grow through social impact, precisely in the less powerful communities in the State of Israel.”
From crisis response to a new banking model
Balasha emphasized that alternative banking models are already well established elsewhere. Across Europe, roughly 30 percent of banking activity is conducted through social, ethical, cooperative, or community banks. In the United States, more than 40 percent of banking is carried out through credit unions. Israel, by contrast, has only a single credit union, which has yet to operate at meaningful scale.
Founded 35 years ago, Ogen has become Israel’s leading nonprofit social lender, providing subsidized and interest-free credit to households, small businesses, and nonprofits that struggle to access traditional financing. Today, Ogen manages more than NIS 1 billion in assets, with over half derived from its own capital base.
Balasha said the organization has reached the limits of what it can do without full banking capabilities.
“A bank allows you to open accounts, register deposits, and mobilize significantly more capital,” he said. “That capital can then be directed to populations the banking sector is less interested in.”
The ambition, he stressed, is not to replace Israel’s commercial banks, but to complement them with a fundamentally different model.
“This would be a sophisticated, conservative, and transparent bank,” Balasha said. “It would operate inside the system, but with a fundamentally different worldview.”
The momentum toward a social bank has been shaped by years of crisis-driven expansion. Since October 7, Ogen has distributed more than $233 million (approximately NIS 742 million) in zero- and low-interest loans, supporting thousands of Israeli households, small businesses, nonprofits, and community institutions.
Within days of the outbreak of war, Ogen launched a large-scale emergency finance response aimed at preventing economic collapse among families and small enterprises. This was followed by dedicated lending tracks for reserve soldiers and their households, as well as targeted programs supporting farmers, Arab communities, and residents of northern and southern regions affected by prolonged displacement and disruption.
According to Ogen’s leadership, these experiences laid bare a consistent pattern: during national emergencies, access to affordable credit often determines whether communities endure or unravel, yet many remain outside the reach of conventional banking.
The conference brought together senior figures from the Bank of Israel, the Ministry of Finance, regulatory authorities, municipal leaders from affected regions, economists, philanthropists, and social entrepreneurs. Discussions focused on post-war reconstruction, economic resilience, and the role of alternative financial models in addressing structural gaps.
Against this backdrop, Balasha argued that the current moment demands a broader rethink of Israel’s financial architecture.
“This is not about charity,” he said. “It is about sound, responsible banking that understands that Israel’s resilience depends on who has access to financial tools – and who does not.”