In Order for the Receipt System to Work and Free up Finance for Farmers, Comprehensive

Storing Up for a Better Future

USAID Helps Increase Across Southern Africa, smallholder farmers sell their pro- Farmers’ Profits in duce right after harvest when markets are in surplus and prices are low. If they could wait before selling, they could Malawi with the reap the benefit of higher prices. With USAID support, the Warehouse Receipts Agricultural Commodities Exchange (ACE) has developed a System warehouse receipts system in Malawi which enables farmers to deposit their crops in a warehouse, receive a receipt for the product, and access bank loans against the receipt as collateral. The farmer thus has access to funds to cover basic needs and can wait to sell the product in response to market demand. k c o t In order for the receipt system to work and free up finance S

p for farmers, comprehensive rules, procedures, and docu- O

o mentation must satisfy bank requirements. ACE requested t o h

P that USAID work with them to ensure these complex requirements were met. Through its Southern Africa Trade Hub project, USAID rewrote the warehouse receipt process USAID met with Malawi banks and created a credit policy model to be submitted to banks’ and insurers to establish their credit committees for credit approval of the system. key individual and collective As a result of USAID’s efforts, in July 2012 First Merchant requirements to finance the Bank of Malawi became the first bank to finance warehouse warehouse receipt system. receipts issued by ACE. In the first full season of operation, Based on this feedback, USAID warehouse receipts have been issued for more than 4,000 created comprehensive metric tons of maize in certified warehouses, more than 500 tons of which were deposited directly by smallholder farmers documentation and held a who received more than US $100,000 in financing. Most of series of workshops and these farmers had never received bank financing previously. trainings to enable funding for As of January 2013, the average depositor had achieved a the system so that farmers can 30% profit over what they would have made if they had sold receive the optimum return on at the time of deposit. This is a net profit after accounting for all storage costs, interest payments and commissions. their hard work and efforts. The documentation developed by USAID, as well as the series of workshops they hosted for ACE, banks, and other grain trade players in Malawi, have enabled bank financing to take place, transforming operations and helping farmers receive the maximum return on their efforts.