On the evening of Sunday October 20, Al-Qard al-Hassan came under massive fire in Beirut from Israel. This is the financial group that supports the Lebanese organization Hezbollah and was hit hard by the attacks.
Israel’s new attacks on Hezbollah, and in particular on Al-Qard al-Hassan, raises various questions about what this banking system is, how it works and why it was targeted by the IDF. Could the blow to Al-Qard al-Hassan be the end of the Lebanese organization?
What is Al-Qard al-Hassan
Hezbollah does not only operate as a military organization, it also has a political arm and specifically provides a series of social services within the borders of Lebanon. In addition Al-Qard al-Hassan is registered in the country of Lebanon as a charitable institution.
Its name translates as “benevolent loan”, as it lends money without interest, as prescribed by Islamic culture. Loans do not exceed $5,000 and are backed by deposits of gold, jewelry, or other valuables. Gradually, Hezbollah encouraged Lebanese beyond the Shiite sect to borrow from Al-Qard al-Hassan.
At the same time, it offers services such as savings accounts, financial transfers and processes payments.
Al-Qard al-Hassan has about 30 branches, which stretch from Beirut to the Bekaa Valley, according to Reuters. Thus this banking organization becomes the largest microcredit organization in a country where the traditional banking sector is “under collapse». Its peculiarity, however, is that it is not subject to the Central Bank and is not part of the international banking system.
What is the role of Al-Qard al-Hassan
Hezbollah was formed in the early 1980s and almost immediately emerged as a major force in Lebanon, providing social support to much of the country’s Shiite population.
Three years later, in 1983, Al-Qard al-Hassan was established to serve the Shiite community. Several years later, in 2019, it gained more customers as Lebanon’s banking system collapsed.
US sanctions
The US says the financial group in question is used by Hezbollah to manage its finances. As has been said, it functions as “cover for managing the terrorist group’s financial activities and gaining access to the international financial system».
In 2007, the US Department of State sanctioned Al-Qard al-Hassan for acting as a de facto banking arm of Hezbollah, the New York Times reported. While in 2021, in the wake of the Lebanese economic crisis, sanctions were strengthened. At the time, the ministry had accused the group of “hoarding ‘hard currency’ that the Lebanese economy desperately needs”, while endangering the stability of the state.
Why is Israel attacking Al-Qard al-Hassan
Shlomit Wagman in the New York Times, former head of Israel’s Anti-Money Laundering and Terrorist Financing Authority, said that Al-Qard al-Hasan has become Hezbollah’s main financial institution, securing Iranian funding of around 750 million dollars annually. At the same time, he is responsible for managing the proceeds from the organization’s criminal operations and their use in attacks against Israel.
In a statement after Sunday’s attacks, the IDF said the banking group “directly funds Hezbollah’s terrorist activities“, including the purchase “weapons and payments to agents of the military wing of the organization». In fact, as he added, these strikes are part of Israel’s strategy to degrade the Lebanese organization. It aims to “flatten its banking system” so that the Shiite group will not have the ability to rebuild.
Israel’s purpose
The Israeli army accuses the banking group of participating in “the financing of the terrorist activities of the Hezbollah organization against Israel, and therefore the Israeli army decided to attack this terrorist infrastructure.”
Asked by reporters if the branches could be considered military targets, a senior Israeli intelligence official said: “The purpose of this attack is to target Hezbollah’s ability to operate financially both during the war and afterwards to rebuild and re-equip the next day.”
Israel, on Sunday, declared that it had exhausted “its targets and chose to target Al-Qard Al-Hasan”.
The IDF also said it had killed Hezbollah’s head of money transfers in a strike in Syria and that it had located a cache in Beirut filled with “millions of dollars in gold and cash.”
The impact of the attacks
Damage from recent Israeli strikes on Al-Qard al-Hassa remains unclear.
As Shlomit Wagman explains, few of Al-Qard al-Hassa’s traditional bank branches likely held significant amounts of cash. However, the international sanctions against its banking system demonstrate that its branches are important warehouses of dollars as well as gold.
In the event that these are destroyed in the attacks, it is likely to limit Hezbollah attacks in the future. Of course, if this happens it will be temporary, as it is estimated that Iran is the main sponsor of the Lebanese organization and will therefore very soon resupply.
But beyond the refinancing, the psychological cost of the continuous strikes and mass destruction in Lebanon is high and is likely to significantly reduce the Lebanese people’s trust in Hezbollah.
Makram Ouaiss, executive director of the Lebanese Center for Policy Studies, a Beirut-based research organization, told the New York Times that Al-Qard al-Hasan likely knew it would be targeted and had moved valuables to a safe location.
He also added that most of the bank group’s branches in Beirut occupy the ground floor of mixed commercial and residential buildings. “This is probably not going to hurt Hezbollah, but it will hurt many Lebanese“, he emphasized.
At the same time, SkyNews reported that the IDF claims to have killed Hezbollah’s “treasurer”. If the fact is confirmed, it means that the Lebanese organization will have lost another high-ranking executive.
The economic situation in Lebanon
The economic situation in Lebanon is “disastrous”. Its traditional economic system almost collapsed in 2019, due to bad policies, bad loans and corruption. This has resulted in many account holders at established banks being unable to access most of their funds for years.
The World Bank estimates that more than a third of the country lives below the poverty line, based on the data. With more than a million Lebanese displaced and hundreds of buildings destroyed by Israeli bombardment in the past month, the number of people living in poverty is likely to have greatly increased.
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