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Analysis: Israel targets Hezbollah's financial arm as part of strategy to hit its popular base

Smoke rises above buildings from an Israeli airstrike that targeted Al-Hawsh village outside Tyre City, Lebanon, on Tuesday. Thirteen people, including a child, were killed and 57 people wounded in an Israeli strike near Rafik Hariri University Hospital in southern Beirut. Photo by Nizar Kashmar/UPI
Smoke rises above buildings from an Israeli airstrike that targeted Al-Hawsh village outside Tyre City, Lebanon, on Tuesday. Thirteen people, including a child, were killed and 57 people wounded in an Israeli strike near Rafik Hariri University Hospital in southern Beirut. Photo by Nizar Kashmar/UPI | License Photo

BEIRUT, Lebanon, Oct. 22 (UPI) -- Israel took its war against Hezbollah to another level by targeting its financial institution, Al Qard Al Hassan, for allegedly funding the group's military activities. But experts view the move as part of Israel's determination to destroy the Iran-backed militant group and create a rift with its popular base.

Breaking the routine, Israeli jets carried out a wide-scale attack Sunday night, destroying dozens branches of Al Qard al Hassan Association in Hezbollah's strongholds in Beirut's southern suburbs and southern and eastern Lebanon.

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The association was established as a non-profit charity institution to support the poor Muslim Shiite population after the 1982 Israeli invasion of Lebanon. It has been offering its customers saving accounts and small interest-free loans in exchange for gold deposits to pay school fees, establish small businesses and install solar panels.

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Lebanon's economic crisis and the collapse of its banking sector in 2019 have pushed desperate Sunni Muslims and Christians to seek loans from the Hezbollah-affiliated association.

Amal Saad, a Hezbollah expert and lecturer in politics and international relations at Cardiff University, said in a tweet that the fresh Israeli strikes don't target Hezbollah's finances or Iran's funding, but "the economic lifeline" of over 300,000 depositors, 85% of whom are Shiite, who rely on the association for interest-free loans.

Saad said Israel's "collective punishment" that targets Hezbollah's popular base amount to "a strategy aimed at further impoverishing" Lebanon's already vulnerable and largely displaced Shiite community.

Separate financial structure

According to Kassem Kassir, a political analyst who specializes in Islamic movements and is close to Hezbollah, Al-Qard Al-Hassan (Good Loan) association is a social institution that helps people across the country and "has nothing to do with Hezbollah's financial structure."

"It is part of Hezbollah's social vision and does not affect its financial or internal structure," Kassir told UPI, arguing that the group "does not benefit from Al Qard Al Hassan and does not invest its money there."

He explained that the association evacuated its offices and branches weeks ago, with "the gold and deposits preserved in [other] places."

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Kassir linked the decision to target the association to Israel's "military failure and inability to confront the resistance."

Despite the heavy blows that Hezbollah suffered, the group's fighters still are engaged in fierce combat with Israeli advancing forces in southern Lebanon and firing rockets and missiles into various parts of Israel.

Sunday's attacks were part of an Israel relentless campaign to destroy Hezbollah, that started more than a month ago with the assassination of its Secretary-General Seyyed Hassan Nasrallah and his top commanders, and smashing its headquarters, missile launchers and arms depots. Its financial institutions were now added to Israel's long targets list.

Create a rift

The Israeli actions, Kassir maintained, will not fulfill its desire to "create a rift" with the group's popular base which "is steadfast and determined to continue resisting."

However, the ongoing war might create a new reality for Hezbollah, listed as a terrorist organization by the United States, and Al Qard Al Hassan, which was sanctioned by the U.S. Treasury Department in 2007 for being used as a cover to manage the militant group's financial activity.

Antoine Farah, a writer and economic expert, explained that the association has been operating outside Lebanon's official financial system "meaning that there hasn't been any kind of supervision from the financial authorities, so in legal terms, it is an illegal institution."

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"It was born as a de-facto and the authorities were not able to deal with it," Farah told UPI, explaining that it then expanded, opening branches, having its own ATM and somehow becoming "an independent banking system operating on its own."

Targeting Al Qard Al Hassan, he said, is "kind of destroying Hezbollah's infrastructure," especially that it was contributing to financing the group's own community.

"It was used as a tool to attract followers, mainly the poor, and maintain their loyalty," Farah said.

Future loans unclear

It is yet to be seen whether the association will be able to continue providing loans for its customers despite its assurances that their gold deposits and savings are safe.

According to Munir Younes, an investigative journalist and economic analyst, doubts existed "concerning the gold and money deposits and whether they were hidden in Hezbollah's most secure places, meaning 'the security square' in the southern suburbs where the Hezbollah chief himself was assassinated while in his bunker."

"Lots of talk and no one can confirm," Younes said.

On Tuesday, the head of Hezbollah's media office, Mohammad Afif, confirmed that Al Qard Al Hassan "is a purely civil institution licensed by law," and has taken "all precautions" necessary to fulfill its obligations towards its depositors in anticipation of the Israeli strikes.

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Afif said during a news conference that Hezbollah only interfered in 2019, when Lebanon faced a financial collapse, to protect the association's depositors by covering their loans and not touching their gold deposits. At that time, the Lebanese have lost their savings deposited in the licensed banks.

By targeting Al Qard Al Hassan, Israel is destroying "any economic interest" for Hezbollah, Younes said.

He explained that there are two kinds of depositors at the association: small depositors exchanging their gold for loans and others engaged in larger business activities, depositing large amount of money in exchange for "protection and interests."

A cash economy

Such a protection-interest network is not limited to Hezbollah as there are other influential parties in the country involved in "cash economy businesses [operating] outside the radar of the Finance Ministry."

In 2022, the World Bank estimated Lebanon's cash economy at $9.9 billion or 45.7 percent of GDP.

"Hezbollah is part of it but not all of it," Younes said.

But what to expect after the war ends?

"Would Hezbollah survive and maintain its own current structure? Will Iran be allowed to continue funding Hezbollah and channeling money to it?" Younes asked, referring to his own investigation that estimated Al Qarad Al Hassan's annual turnover at some $500 million and the size of operations since 1982 at $4.3 billion.

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Al Qard Al Hassan, like other non-Hezbollah institutions and businesses flourishing under the cash economy, were the cause behind a decision last October by the Financial Action Task Force to place Lebanon on the "grey list" for failing to implement anti-money laundering and counter-terrorist financing measures.

"Abolishing these institutions in the future may be in the interest of Lebanon's economy for it would be a step among others to get rid of the cash economy and the money-laundering charges," Farah said.

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