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Study Charges Kibbutz Debts Miscalculated by Israeli Banks

February 8, 1996
See Original Daily Bulletin From This Date

A report this week that Israel’s commercial banks miscalculated kibbutz debts, costing the kibbutzim hundreds of millions of dollars, sent shock waves through the government and banking community.

The claims were made in a preliminary draft of a report commissioned by the Kibbutz Headquarters Association, a body representing some 100 collective settlements.

The Procaccia Report, named after Professor Uriel Procaccia who prepared it, questioned the manner in which the banks calculated kibbutz debts dating back to the 1980s.

According to the report, instead of the current situation in which the kibbutzim owe large amounts of money to the banks – primarily Bank Leumi and Bank Hapoalim – the banks miscalculated the debts and, in some cases, actually owe the kibbutzim money.

“In the 1980s, banks charged inflated interest rates,” said Tsafrir Ronen, director general of the Kibbutz Headquarters Association. “But it turns out that with some of these kibbutzim, it is the banks who owe them money.”

Total kibbutz debts to the banking sector are estimated at some $5 million.

The repayment of debts by the kibbutzim to the banks was arranged in two settlement agreements – the first in 1989, and a supplementary agreement approved last year by the Knesset Finance Committee.

But in the wake of this week’s report, a number of kibbutzim asked to reevaluate their debt settlement arrangements.

“They want to reevaluate the situation, to see if perhaps they would be able to hold on to some of the land they are currently required to give up under the contract,” he said.

Meanwhile, the United Kibbutz Movement attacked the Procaccia Report, saying that it was politically motivated to get more money out the government and that it will only jeopardize the debt settlement agreements.

The commercial banks also rejected the report – particularly its statements that if the loan miscalculations proved true, the stability of the banks would be threatened.

Ze’ev Abeles, supervisor of banks, said that the banks have enough reserve funds on their balance sheets to cover the doubtful debts, if necessary.

Agriculture Minister Ya’akov Tsur demanded a commission of inquiry into the matter, saying the kibbutzim had suffered enough.

“It is time to address the injustice done to the kibbutzim for years,” he said.

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