Warehouse financing takes off in East Africa

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18 January 2010

Trade Finance's Dickon Harris examines two inventory financing schemes being developed in Uganda and Ethiopia.

The Uganda government has begun a significant expansion of its Warehouse Receipt System (WRS) as it plans to build 21 fully equipped public warehouses countrywide by 2011.

The WRS allows farmers to deposit their produce into a certified warehouse and then use the produce as collateral to secure bank loans and negotiate better prices. Some of the benefits producers can expect include improved storage, streamlined trading, international standards in grading and measuring deposits, and more flexible trading options.

WRS stems from the May 2006 legalisation of negotiable and transferable receipts issued for deposits in public warehouses. Since then four public warehouses have been licensed and equipped to issue electronic warehouse receipts and five commodities have been licensed to be accepted by the regulators. These include maize, beans, paddy rice, cotton and coffee.

The WRS has already seen 4,000MT of maize receipted through the system. These may figures appear...

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Poll

Will Russia’s recent ban on grain exports result in a significant rise in private risk insurance claims from grain traders unable to fulfil their contracts?

Yes – there will be more claims. The government’s actions allow traders, with PRI cover, to make claims through contract frustration.

No - the majority of Russia’s wheat production, some 70%-80%, is used for domestic consumption so the contracts represent only a small portion of the total wheat market, limiting the amount of potential claims.

23%

No - traders had a week’s notice before the ban allowing them to secure alternative supplies to fulfil contracts stated as optional origin.

23%

Maybe - but claims are likely to be limited to traders dealing in soft wheat whose contracts demand they source wheat only from Russia.

46%