Can you invest in Middle East peace?

There are ways to invest in the economies of Israel and the Palestinian territories, separately – and women's progress in the Middle East, indirectly. But investing in the Middle East is not for the faint of heart.

As winds of change sweep the Middle East, brave investors are exploring how capital might help encourage reforms.

They're discovering a landscape dotted with unique risks and niche opportunities: ways to invest in Israel, the Palestinian territories, and even in the hiring and promoting of women (although not specifically focused on that area of the world). The questions for individual investors: What's my vision for progress in the Middle East? Do I have the wherewithal and risk tolerance to invest?

"The Middle East is really hard to work in, and has all sorts of risks," says Jim Pickup of the Middle East Investment Initiative, a nonprofit in Washington that aims to boost business financing in the Palestinian territories. "To get a social return as well as a risk-adjusted return has been a real challenge."

Some agendas are easier to support through investing than others. Pro-Israel holdings are the most accessible to Westerners. Bonds to pay for Israeli infrastructure projects, such as expanded ports, are available with a few clicks at israelbonds.com. Also, there's Timothy Israel Common Values Fund, a year-old mutual fund weighted toward Israel's strongest sectors, such as technology and health care, as well as real estate.

Investors in the fund "bless ... the only real ally we [Americans] have in the Middle East," the fund says. But it's not for the faint of heart. Israel-focused funds "tend to be risky [since] Israel is inextricably tied to geopolitics in the region," says David Kathman, a Morningstar analyst. By mid-December, the fund was up 8 percent versus its benchmark (up 13.7 percent) and its category (up 18.7 percent).

Providing direct investment for Palestinians is harder since their economy is less developed than Israel's. Institutional investors have put money into private equity funds and venture capital projects, which require more cash than ordinary investors usually have. But opportunities exist.

Microfinance through FATEN (Palestine for Credit & Development) offers an avenue for Americans to support small businesses in the West Bank and Gaza, according to John Wimberly, co-moderator of Presbyterians for Middle East Peace, a grass-roots group working to advance regional peace by supporting the Palestinian economy. This year, the United Methodist Church and the Presbyterian Church (USA) joined other denominations in committing assets to that effort. FATEN is accessible through its partner, Kiva, where investors earn 8.3 percent by bankrolling Palestinian entrepreneurs.

Another option: The Palestine Exchange (PEX) in Nablus is accessible to individuals online at www.pex.ps or through brokers who are PEX members. PEX attracts more than $31 million in US investment, including $8.6 million from retail investors. One option for socially conscious investors: Buy big banks, such as the Bank of Palestine, whose lending helps juice the entire economy. But Mr. Pickup notes a possible downside: Banks have ties to the Palestinian Authority, a turnoff to some.

For those keen to promote women's status in Middle Eastern countries, options tend to center on encouraging what's already working. The Pax World Global Women's Equality Fund has 3.5 percent of its holdings in the Middle East, specifically Israel and Turkey. This shows how empowering women to be workplace leaders – in the Middle East and elsewhere – is good for the bottom line, says Julie Gorte, a senior vice president at Pax World.