In the midst of the crisis, Hezbollah is a lifeline for some Lebanese
BEIRUT (AP) – When Lebanon’s financial crisis began in late 2019, Hassan Shoumar, like everyone else in the country, was locked out of his dollar savings when banks cracked down on capital controls.
But the young engineer had an alternative. He was still able to withdraw the dollars in his account with the al-Qard al-Hasan association, the financial arm of the militant Hezbollah group.
Shoumar had had an account with the association for years since taking out a loan to pay tuition fees. In contrast to the Lebanese commercial banks, the accounts at the union did not earn interest. But that didn’t matter to the 28-year-old Shoumar.
“What is important to me is that I can get my money when I want it,” he said over the phone from southern Lebanon.
Hezbollah intervenes where the state and financial institutions have failed, providing a vital lifeline for some Lebanese. In the country’s devastated economy, everyone is desperately looking for hard currency and liquidity as the local currency depreciates. At commercial banks, depositors stand in line for hours, fighting in vain with managers for their dollar savings. Most banks have stopped lending.
But Hezbollah’s al-Qard al-Hasan allows people to take out small, interest-free dollar loans that they can use to pay school fees, get married, buy a used car, or open a small business. You can also open savings accounts there.
The association, officially a non-profit organization, is one of the tools Hezbollah is using to cement its support among the country’s Shiite population, even though the group was heavily criticized last year among Lebanese who are angry at the political elite.
As poverty rises across Lebanon, Hezbollah provides low-cost schools and hospitals to its communities and distributes heating 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 have lost around 80% of their value in the crisis.
Last year, the al-Qard al-Hasan association recorded a significant increase in customers, although it has been subject to sanctions by the US Treasury Department since 2007.
“People’s lack of trust in the banking sector has forced them to look elsewhere,” said Batoul Tahini, a spokeswoman for the association.
She said the number of deposits was much higher than in 2019 and in previous years, although loans had not increased very much. She didn’t want to give exact numbers.
Hezbollah chief Sayyed Hassan Nasrallah said in a recent speech that around 300,000 people are currently involved with the association through loans. The association says that its customers come from the various sects of Lebanon. However, it is believed that the vast majority are Shiite Muslims.
Roy Badaro, a Lebanese economist, said the association was part of state within Hezbollah state and a “covert way to complement its activities with microfinance, much like Hezbollah-run schools, hospitals, etc.”
“The aim is to absorb the economic crisis among poor Shiites,” he said.
Al-Qard al-Hasan, whose name means “benevolent credit” in Arabic, offers interest-free loans up to US $ 5,000 and, what is important these days, in dollars. It has been active for more than three decades and is considered to be the largest non-bank financial institution in Lebanon providing microcredit.
Customers must deposit gold as collateral or bring a guarantor. They then repay the loan in monthly installments for up to 30 months, after which they receive the collateral back. Customers can also set up accounts to deposit money that will then be used to fund the loans. The association works according to Islamic rules that prohibit interest.
Lebanon’s economic and financial crisis is the worst in the country’s modern history, with the economy shrinking 19% in 2020. Tens of thousands across the country have lost their jobs and almost half of the 6 million plus population live in poverty.
The crisis has shaken people’s confidence in the Lebanese banking system, which was once one of the most prestigious in the region. When banks took a hit, many people decided to keep their money, up to $ 10 billion worth, at home, according to central bank governor Riyad Salameh.
This has proven to be a blessing for the al-Qard al-Hasan association, as some have used it as an alternative to storing their cash.
The risk for Hezbollah is that as poverty increases and the economic crisis deepens, many people will no longer receive their loans, said economist Badaro. If that happens, Hezbollah may have to use its own funds to cover the deposits, he said.
The fame of the club also made him a goal.
A group of hackers called “Spiderz” claimed they had broken into the association’s system and released the identities of some customers and footage from surveillance cameras in some of their branches. It warned customers to withdraw their money, otherwise they could come under American sanctions.
Al-Qard al-Hasan confirmed a cyberattack in late December that was described as “partial and limited”. It told customers not to worry about their identities being leaked. Tahini said the problem is being investigated.
The fact that the association’s customers are getting their dollars with no problems has also fueled resentment about Hezbollah’s power in Lebanon.
“This shows that Hezbollah is safe and relaxed while we are in a dilemma,” said Walid Joumblatt, political leader of the Lebanese Druze community and Hezbollah critic, in an interview with Sky News Arabia. He joked that like conservative Muslims, he grew his beard to get a loan from al-Qard al-Hasan.
In a speech days later, Hezbollah leader Nasrallah shot back and said everyone just had to fill out an application and deposit the gold collateral.
He also portrayed the club as rock-solid, which has provided around 1.8 million people in loans totaling $ 3.7 billion since it was founded. He boasted that US sanctions against Hezbollah officials only strengthened al-Qard al-Hasan as some of them had moved their accounts from banks to the association.
He first revealed that during the 2006 war with Israel, Israeli warplanes struck a place where money and gold were being stored. Nevertheless, he boasted, every customer gets their money’s worth.
“Nobody has ever lost a cent,” he says.