Paper

Warehouse Receipts: Financing Agricultural Producers

How can warehouse receipt systems help small-scale farmers maximise their profits?

This document outlines the advantages of warehouse receipt financing for both small-scale farmers and MFIs in rural regions across Africa:

  • Producers can gain access to storage facilities, enabling them to maximize profits;
  • The use of collateral as a loan guarantee makes the risk to MFIs minimal and opens up a new client segment that MFIs usually have difficulty reaching.

The paper notes that:

  • The experience of groups such as TechnoServe Ghana and the Ministry of Rural Development in Niger illustrates that a warehouse receipt system is best targeted to organized producer groups that can collectively bargain in the marketplace;
  • Individual producers need to be educated on the market's behavior and given adequate tools to ensure that all profits are not lost by speculative activities;
  • MFIs face many challenges and constraints to implementing an inventory credit system successfully, many of which are out of their control.

The paper concludes that through careful product development MFIs can create an inventory credit system that works smoothly and profitably. At the same time, MFIs must be careful to:

  • Appropriately price products;
  • Have a thorough knowledge of the market and sector in which they are working;
  • Work to actively facilitate negotiating and selling.

All these factors have direct implications on the sustainability of MFI programs and their ability to continue providing such an important financial product.

About this Publication

By Coulter, J., Kwadzo, G. & Bakari, S.
Published