LORD FARINGDONasked His Majesty's Government whether they are now in a position to give particulars as to the interest rates on advances to growers in citrons in Palestine.
§ THE SECRETARY OF STATE FOR THE COLONIES (LORD MOYNE)Advances to growers of citrus in Palestine, under the arrangements made for financing the 1940–41 crop, carried an interest rate of 5½ per cent. per annum, plus a commission of 1 per cent. as an administration fee; but there was a stipulation that the banks should pay to the Government 1 per cent. per annum on the portion of the advances guaranteed by them. This rate was fixed as being the ordinary commercial rate payable in Palestine at the time. For the 1941–42 season the rate of interest was fixed at 6 per cent. per annum, but the 1 per cent. administration fee was eliminated, and it was provided that the banks should pay to the Government 1½ per cent. on that part of the advances—namely, two-thirds—carrying the Government guarantee, so that the banks receive the full 6 per cent. only on one-third of the advances made. Compared with the previous season the grower was paying ½ per cent. less for his money and the average rate received by the banks was reduced by nearly 1 per cent.
The initiation of the scheme involved the banks in the expense of setting up special machinery to investigate the position of thousands of individual growers and to control their borrowings during 1940–41, and the management is still being conducted by the banks during 1941–42 and will involve similar investigations. The banks entered the scheme with a desire to assist the industry and a realization that the advances which fell outside the Government guarantee were bad banking risks. The Government have priority of repayment over the banks, and in these circumstances the net rate receivable by the latter must be regarded as very reasonable, especially having regard to the work entailed.
House adjourned.