Why farmers will await warehouse receipts for longer
MONEY: Commercial banks mean to implement a warehouse receipt system with farmers have fingered risks that must be sorted out before they can advance loans to farmers using warehouse receipts.
According to the Warehouse Receipt System Council (WRSC), the seven commercial banks raised concerns over quality of products, price assurance and security which they wanted tackled before they start issuing loans.
Further, apart from these, WRSC chairperson Jane Ngige says there ought to be sufficient demand for trading receipts and trading.
Seven commercial banks
“Some of the commercial banks that have expressed interests in implementing the WRS include Equity, Co-operative, Kenya Commercial Bank, ABSA and Family bank. We have placed the whole responsibility of the warehouse management to the operator. The operator must also have performance bond and insurance of the product,” said Ngige.
Speaking during a WRSC stakeholder validation forum at a Nairobi hotel, Ngige noted that the council has expanded the list of foods to be managed under the warehouse receipt system.
The list has been expanded from maize to include potatoes, tea, coffee and legumes. In future we will also target fresh produce and milk,” she added.
Using the receipt to access loans from the commercial banks will cushions farmers from cartels who entice them to sell their produce in a hurry to meet their immediate financial needs.
East African Grain Council (EAGC) executive director Gerald Masila said that local warehouses do not have much food following low production in 2021/2022 year.
Requirements
“Low food production in the last one year has equally contributed to little stocks in both public and private warehouses. Much of the maize was consumed while still green,” said Mr. Masila.
According to WRS datapublished early this year, only companies that will demonstrate ability to raise adequate capital to finance initial investment in infrastructure and three years operational expenses will be licensed to operate new stores under the new WRS. Investors interested in undertaking food crops management under the new system must submit a business plan for the intended warehouse business. Silos must also meet Codex standards -a collection of standards, guidelines and codes of practice.
