How Hezbollah is using its financial arm to gain local support
When Lebanon’s financial collapse began in late 2019, Hassan Shoumar was barred from accessing his dollar savings, like everyone else in the country, as banks cracked down on capital controls.
But the young engineer had an alternative. He could still withdraw the dollars from his account at the Al-Qard al-Hasan Association, the financial arm of the militant Hezbollah group.
Mr. Shoumar had kept an account at the association for years, since he had taken out a loan from the association to pay for university fees. Unlike Lebanese commercial banks, the association’s accounts did not earn any interest. But Mr. Shoumar didn’t care.
“What matters to me is that when I want my money, I can get it,” he said by phone from southern Lebanon.
By intervening where the state and financial institutions have failed, Hezbollah provides a vital lifeline for some Lebanese, even as the group has come under huge criticism over the past year among Lebanese. furious with the political elite. In the country’s crumbling economy, everyone is in desperate need of hard currency and cash as the value of the local currency crumbles. In commercial banks, depositors stand in line for hours and fight unsuccessfully with managers to access their dollar savings. Most banks have stopped lending.
But in Hezbollah’s al-Qard al-Hasan, people can take out small interest-free loans in dollars, which allows them to pay school fees, get married, buy a used car, or open the door. a little company. They can also open savings accounts there.
The association, officially a non-profit charitable organization, is one of the tools through which Hezbollah strengthens its support among the country’s Shiite population.
With poverty increasing across Lebanon, Hezbollah is providing its community with low cost schools and hospitals and distributing fuel oil to the poor. Hezbollah continues to pay its fighters and employees in its institutions in US dollars, while everyone else receives their salaries in Lebanese pounds, which lost around 80% of their value in the crisis.
Over the past year, the al-Qard al-Hasan association has seen a significant increase in the number of clients, despite being under US Treasury sanctions since 2007.
“People’s lack of confidence in the banking sector forced them to find other places,” said Batoul Tahini, spokesperson for the association.
She said the number of deposits was much higher than in 2019 and previous years, although lending has not increased much. She declined to give exact figures.
In a recent speech, Hezbollah chief Sayyed Hassan Nasrallah said around 300,000 people are currently dealing with the association on loans. The association claims that its clients come from different sects in Lebanon. But the vast majority are said to be Shia Muslims.
Roy Badaro, a Lebanese economist, said the association was part of Hezbollah’s state-within-a-state and “a disguised means of supplementing its business through microfinance, such as schools, hospitals, etc. managed by Hezbollah ”.
“The aim is to absorb the economic crisis among the poor Shiites,” he said.
Al-Qard al-Hasan, whose name in Arabic means “the benevolent loan,” offers interest-free loans up to $ 5,000 and, especially nowadays, grants them in dollars. Active for more than three decades, it is considered the largest non-bank financial institution in Lebanon providing microloans.
Customers have to put gold as collateral or bring a guarantor. They then repay the loan in monthly installments for up to 30 months, after which the collateral is returned. Customers can also open accounts to deposit money, which is then used to fund loans. The association operates under Islamic rules prohibiting interest.
Lebanon’s economic and financial crisis is the country’s worst in modern history, with an economy shrinking 19% in 2020. Tens of thousands of people across the country have lost their jobs and nearly half of the population of over 6 million is in poverty.
The crisis has shaken people’s confidence in the Lebanese banking system, once among the most respected in the region. As banks were hit, many people decided to keep their money at home, amounting to as much as $ 10 billion, according to central bank governor Riad Salameh.
This proved to be a boon for the al-Qard al-Hasan association, as some turned to it as an alternative to store their money.
The risk for Hezbollah is that as poverty increases and the economic crisis worsens, many people risk defaulting on their loans, economist Badaro said. If that happens, Hezbollah may have to use its own funds to cover the deposits, he said.
The notoriety of the association has also made it a target.
A hacking group calling itself “Spiderz” claimed to have broken into the association’s system and displayed the identities of some customers and footage from security cameras of some of its branches. He warned customers to withdraw their money or face US sanctions.
Al-Qard al-Hasan confirmed that there was a cyberattack at the end of December described as “partial and limited”. He told customers not to worry about their identity being revealed. Ms Tahini said the matter was under investigation.
The fact that the association’s clients get their money without a hitch has also sparked resentment about Hezbollah’s power in Lebanon.
“It shows that Hezbollah is safe and relaxed, while we are in a dilemma,” Walid Joumblatt, political leader of the Lebanese Druze community and critic of Hezbollah, said in an interview with Sky News Arabia. He joked that he grew his beard like conservative Muslims to get a loan from al-Qard al-Hasan.
In a speech a few days later, Hezbollah chief Nasrallah fired back, saying all anyone had to do was fill out an application and put the gold guarantee in place.
He also described the association as being strong, providing $ 3.7 billion in loans to some 1.8 million people since its inception. He boasted that US sanctions against Hezbollah officials only strengthened al-Qard al-Hasan, as some of them transferred their bank accounts to the association.
He first revealed that during the 2006 war with Israel, Israeli warplanes struck a site where silver and gold were being stored. Despite this, he boasted, every customer had their money.
“No one has ever lost a dime,” he said.
This story was reported by The Associated Press.