The use of warehouse receipt finance in agriculture in transition countries.
Directions in Investment series - N. 3 - 2009
If agriculture is to contribute to the development of the economy, and farmers are not to be left behind, then agriculture needs a proper credit system. Post-harvest credit in the form of warehouse receipt finance has proved to be a critical component for agriculture sector growth in emerging economies. Efficient warehouse receipt finance allows farmers to avoid selling directly after harvest, when prices are depressed. It encourages storage by reducing the cost and by increasing liquidity in entire commodity chains, which in turn reduces price volatility. By giving farmers access to a new financing tool, it enhances their ability and incentives to invest in production. This paper discusses the state of warehouse receipt finance in countries of Eastern Europe and Central Asia (ECA), and possibilities for enhancing its use. It describes legal and regulatory issues that need to be resolved, and how the international community can help in the process. Annex 1 summarizes some experiences with warehouse receipt finance in Africa and Asia. It is hoped that this paper will encourage all those interested in agricultural development in ECA and other regions to improve the conditions for and use of warehouse receipt finance, and that it will assist them in doing so.