Before it was closed, the Islamic Association used to provide. When I ran out of wheat or sugar I used to go to the head of the association... he knew our situation

Khalil Yousef, Palestinian refugee in Gaza

Most of these groups are closely affiliated to militant Islamic groups such as Hamas and Islamic Jihad.

Israel alleges that the humanitarian associations form the infrastructure and raise money for the armed wings of the militant groups.

But the closure of the charities has been deeply unpopular among Palestinians.

Many people in Gaza and the West Bank are dependent on Islamic associations for basic foods and medicines.

Tackling the militants

Mr Arafat has tried to clamp down on Islamic groups but this action has caused internal strife. There is a consensus among armed Palestinian groups, including members of Mr Arafat's Fatah organisation, in favour of attacks on Israel and Israeli soldiers and settlers.

In 1996, after a wave of suicide bombings, the PA came down hard on Hamas and Islamic Jihad, rounding up members and taking over the mosques.

Ahmed Bahhar: 'We are a humanitarian organisation'

Much has changed since then. In 1996 there was a peace process. Now, after nearly a year and a half of intifada, or uprising, Palestinians are deeply disillusioned and angry.

In these circumstances, Hamas and Islamic Jihad have thrived.

Many Palestinians view the killing of Israeli civilians - as well as military personnel - as a legitimate response to Israel's killing of hundreds of Palestinian civilians.

Welfare work

The charity and welfare work of associations affiliated to the militant groups is another source of popularity among Palestinians.

It also contrasts very favourably with the inefficiency and corruption of the PA ministries.

From Israel's point of view, anyone who is serious about his religion or works to help his compatriots is considered a terrorist

Ahmed Bahhar, head of the Islamic Association

Palestinian refugees such as Khalil Yousef, a resident of the al-Shati camp in Gaza, have for more than a year depended on the Islamic charities, such as the Hamas affiliated Islamic Association, for food.

"Before it was closed, the Islamic Association used to provide. When I ran out of wheat or sugar I used to go to the head of the association, and he would write out a receipt and we would go and collect it from their stores. He knew our situation," he told BBC News Online.

"Now we have only Unwra (the United Nations Relief and Works Agency for Palestine Refugees). But what use are the coupons when you have six children. Every month we get a sack of wheat - that's all we get. I've cashed in my pension and spent it to get by.

"The kids need school books and new clothes. We can't afford any of that. Sometimes we have nothing in the kitchen," he said.

Charity or terrorism?

The head of the Islamic Association, Ahmed Bahhar, denies that his association raised money for the militant wings of the Islamic groups.

The headquarters of the Islamic Association in Gaza

"Let me stress that the Islamic Association is a charitable organisation that works to provide relief for the Palestinian people without discrimination. Such allegations are slander propagated by the enemies of Allah and Zionists," Mr Bahhar said.

The Islamic Association is a registered humanitarian organisation which, Mr Bahhar insists, works to care for the handicapped and to provide aid to poor families.

He invited anyone interested to study the organisations finances.

"From Israel's point of view, anyone who is serious about his religion or works to help his compatriots is considered a terrorist," Mr Bahhar said.

'Fuelling the intifada'

Mr Bahhar says that the closing of organisations like his will only increase the suffering of Palestinians.

In winter the streets of al-Shati refugee camp are in flood

"This can only fuel the intifada and Palestinian protests. If the PA is perceived as the main cause of the shutting down of the charities, you will not be able to stop people protesting against the PA to demand food."

It is a difficult choice for Mr Arafat.

If he bows to Israeli and US demands to arrest the militants and close down Islamic associations he can expect violent confrontation with Palestinian armed factions.

Is he does not, Israel's campaign to marginalise and cripple him and his institutions will intensify.