WAREHOUSE RECEIPT SYSTEM

By Noel Chanza (4th Year Agronomy Student at Bunda College of Agriculture)

Warehouse receipt system (WRS) is a system that enables farmers who deposit their grain in secure and certified warehouses to have access to finance from reputable financial institutions using the stored commodity as loan collateral. In Malawi, the warehouse receipt system was started  in 2010. The system was designed for small scale farmers (individuals or cooperatives) but it is also open to traders. Currently, ACE facilitates operations of three rural warehouses in Malawi namely Kafulu, Nathenje and Balaka. But ACE also uses urban storage operated by large operators such as Rab and Farmers World.

Looking at the challenges small scale farmers face in Malawi, this is one method to assist rural farmers in the value chain to avoid the 25 % estimated loss due to post harvest losses (due to pests, post harvest disease etc). It includes a number of inter-related components to allow farmers more flexibility in the timing of their sales until they can secure competitive prices in the local market.

The warehouse receipt also certifies the farmer with the title for them to either keep or pledge to provide to third parties. He can also offer it for sale on the trading platform. The warehouse receipt allows farmers to induce confidence in the financial institutions as commodity is available, secure and in good quality. This is also beneficial to the banks as they are able to reach a new set of customers for financial services and products.

Martha Tchesa from mtiti village in Dowa, 70 Km north of Lilongwe is one of the farmers who has benefited a lot through warehouse receipt system. She deposited about 21.4Mt of maize at Kafulu Warehouse in Dowa. She used her warehouse receipt as collateral to obtain a bank loan of MK 550,000 (about $1800.00). She used the money to boost her grocery store. She is now happy because her maize is safe, secure and already prices have gone up. "I have already seen that the prices are going up, I intend to sell my maize at around Mk 80 later in the year" she said.

Malawi suffers food shortages in some districts especially in the south. Warehouse Receipt System is perhaps the answer as it also helps to improve food security through a "buy back" function that allows rural farmers to collect their food during vulnerable periods after they have paid the finance and storage.

Inside Kafulu Warehouse