A new ruling for the registration of organizations not yet officially publicized determines that any association that takes gemach deposits will be denied administrative recognition by the government.
Lawyer Shlomi Bilbasky, responsible for the Certification of Proper Administration in the registry of organizations, announced this decision at a recent meeting held with accountants of the financial publication, The Marker, saying that the government registry has already denied Certification of Proper Administration from a small number of organizations which were found to maintain a gemach by accepting money deposits and issuing free loans.
The Ministry of Justice explained that since the whole issue of gemachim is being examined at the moment, it has been decided that in the interim, the registry of associations that were already approved will not take steps to dismantle those bodies but will suffice with the more lenient step of denying the Certification of Proper Administration.
MK Rabbi Gafni presented a bill a year and a half ago regarding this matter in the ministerial committee for legislative action but has not yet presented it in the Knesset plenum. The Israel Bank objected to the bill, which stirred up a lively confrontation between Rabbi Gafni and the I.B. Governor Stanley Fisher, which was fully aired by the press. Rabbi Gafni's reaction was that "the law is used to harm one of the most important Jewish institutions. A dry interpretation of the law is being made instead of discussing it in depth and reaching a satisfactory solution." He said that the victims of this step will be the weaker elements of society who avail themselves of gemachim.
A Certification of Proper Administration is very significant in the operation of an organization. According to a government decision, a body receiving government support and which provides services to government offices, is required to produce such certification. Not issuing this certification affects an organization's power to raise funds from the private sector since it does away with the incentive of tax deduction.
The financial establishment is concerned about the fact that the gemachim accept deposits which they use to fund the loans. In this they assume some of the standard functions of banks, but they function outside of the banking system. This is a situation that may lend itself to abuse, although no one has suggested that so far any abuse has taken place.