review of warehouse receipt system and inventory credit initiatives in ...

Given current policies, there does not seem to be a strong case for establishing a national
regulated WRS 12 , but it is worth pursuing some of the other (incipient) initiatives, and these
may eventually provide the groundwork for a regulated system. UNCTAD or its AAACP
partners should monitor and compare progress of selected initiatives over a period of five
years, with a view to evaluating which works best in different parts of the market chain. The
main projects would be:
• Home storage innovations, involving new hardware, or improved handling and pestcontrol
procedures
• Grain bulking initiatives, such as those promoted by Opportunity International Bank of
Malawi (OIBM) and USAID Grain Bulking Centres project, and
• Unregulated commercial-scale WRS: Farmers’ World, SENWES and/or others
These projects should be appraised in terms of various criteria, of which the most important
are spontaneous adoption by paying users, cost-effectiveness and cost recovery.
Madagascar
Madagascar is an island of 18 million inhabitants, and rice is its dominant food crop. Annual
paddy production reached 3.5 million tonnes by 2006, and it is produced by many millions of
small farmers, the majority of whom do not produce enough for their own requirements. The
country regularly imports 150-200,000 tonnes of milled rice to supplement domestic supplies,
and the international market is therefore key to domestic price formation.
Despite widespread access to irrigation, agricultural productivity remains low and rural
populations experience high levels of indebtedness. Conventional banking is unable to
directly reach the dispersed farming population, and this has led to the development of
mutual microfinance (MF) networks, notably the CECAM (Mutual Agricultural Savings and
Credit) network which started in 1993. By 2008, it had 110,000 members grouped into 162
local branches and 9 regional unions. It is a credit-led system, into which soft loans are
injected against member share capital, which serves as partial collateral, with a view to
building the level of operations to a level where it can refinance itself with commercial banks.
It has made major strides in this direction, but still needs donors to provide some funding and
guarantees with the commercial banks.
There are five loan products, including storage loans, production loans, hire purchase,
commercial loans and social emergency loans. The storage loan component has followed a
growing trend and in 2008 nearly 40,000 tonnes of paddy per annum were stored, almost the
entirety in around 7,000 small stores (usually rooms in domestic dwellings), under a ‘dual
key’ arrangement (the total quantity stored by all MF networks is estimated at 55,000 tonnes).
All products enjoy a high level of acceptance, and the storage loans which account for around
40% of the portfolio, are particularly successful, due to negligible default, and because they
enhance the financial viability of the overall network, open the way to productivityenhancing
products, and facilitate repayment of production loans. Lending is almost entirely
to individuals, as marketing/input supply cooperatives have largely failed in Madagascar.
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In this case feasibility is considered mainly in terms of one crop, maize. The volume of other non-perishable
food crops is relatively small, which renders somewhat difficult the economics of establishing a regulated WRS
without maize. According to FAO statistics, annual production of pulses is around 350,000 tonnes per annum,
including pigeon peas (140,000 tonnes)
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