ADDIS ABEBA – Ethiopia Commodity Exchange (ECX) has launched on Thursday a warehouse receipt financing (WRF) in a bid to boost maize farmers’ access to finance.
The WRF will allow farmers, cooperatives, traders and processors to store maize and use it as collateral to access credit from the Commercial Bank of Ethiopia, said the exchange.
It said the warehouse receipt finance is an inclusive form of lending that “allows large and small-scale players in the agriculture value chain to access loans from the bank.”
The scheme is a collaborative effort of the ECX, Commercial Bank of Ethiopia and World Bank’s International Finance Cooperation (IFC).
Loans worth up to 70 percent of the value of the stored commodity will be issued at a competitive interest and repaid within three months, it was learned.
“This, in particular, is important for farmers who often lack bankable collateral and are therefore forced to sell their crops immediately after harvest when prices tend to be at their lowest,” Wondimagegnehu Negera, CEO of the Exchange, said.
The launched instrument will be functional at Bure and Nekemte maize warehouses of the exchange in Amhara and Oromia regional states, respectively.
Cooperatives are also expected to be a major beneficiary as they can utilize the warehouse infrastructure to offer improved finance and marketing solutions to their member farmers.
“Larger-scale agribusinesses will benefit as well,” said the Exchange, adding: “They can use their inventories to unlock the additional liquidity that can help increase output, product quality and competitiveness”.
To participate, farmers, traders and cooperatives are invited to apply to CBE branches in and around Nekemte and Bure towns.
The CBE is accepting applications for individual loans as well as for multi-loan revolving facilities, subject to eligibility criteria, according to ECX.
IFC, a member of the World Bank Group, extended its support to the ECX and CBE under the Collateralized Commodity Finance (CCF) Project which aims to introduce important and innovative financial instruments to drive efficiency, inclusiveness, and competitiveness in agricultural value chains.
Image: National Bank of Ethiopia Governor, Dr. Yinager Dessie, made the start of the service official in an event held on Thursday [Photo Ecx]