1. Calvin Miller Food and Agriculture Organization of the UN Rome, Italy
Warehouse Receipt Financing and Collateral Management system to promote Agriculture Financing
The good, the bad and reasons why
Calvin Miller
Food and Agriculture Organization of the UN
Rome, Italy

2. Warehouse capacity and management

3. Challenges start with the fundamentals
The warehouse
Challenges start with the fundamentals
The management

4. Bolivia Rice Strategic Alliance FONDECO Rice Mill Rural MFI CLIENTS
Letter of Credit
Rice Deposit
Credit Request
Credit Disbursement
Gives Certificate of Deposit
Rice Mill 1 2 3 4 6 5
Strategic
Alliance
FONDECO
Rural MFI
CLIENTS
FONDECO - a financial institution within a holding company
CCD = letter of credit guarantees payment
MILL
Deposits
Trader
Client??
Aval??
Agents
CLIENT-BENEFICIARY:
Rice Producer has immediate resources required to guarantee the grain deposited in the authorized mill 4

5. Niger Informal Warehouse Receipt System5
Niger Informal Warehouse Receipt System
Market
Stock in warehouse = Collateral guarantee
Small farmer group
Finance institution
Physical flows
In Niger – 33% increase in stock value (in 4-6 months of storage)
18% of food stocks used for the lean season
New income from off-season cultivation
Monetary flows

6. Predictable timing of price peaks ensures price gains
Source: Afrique Verte International, 2010, and Hernandez

7. Efficiency gains since introduction of inventory credit
WRS –Tanzania
Warrantage – Niger
Increase of external finance to bulkers/traders to buy from small holder farmers, but not maize
Increase of external finance for rural households’ non-farm rural activities while commodities are stored
Enabled production and trade growth in specific subsectors, such as coffee, tobacco, cotton, cashew, and sunflowers
Enables to smoother household cash flows and improve household incomes from non-farm and farm activities
Enabled higher price gains within national value chains, but winning segments vary from crop to crop
Although limited, enables greater stability of grain supply for domestic and export markets

8. Who Can Use a Warehouse Receipt System?

9. Crop receipts (rural product bond)
Farmer/group signs binding obligation to pay an amount P which is equal to the cash value of the underlying commodity at issuance (V) plus a margin determined by a fixed or variable reference interest rate. In exchange, the buyer advances resources in the form of financing or inputs to the producer.
At the settlement date, the issuer sells the harvested agricultural commodities in the marketplace and uses the proceeds to pay the buyer the outstanding obligation. At that time, the obligation is considered settled. Prior to settlement, due to the negotiable nature of the CPR, the buyer may offload the claim to a third party in the secondary market.