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

later signed up to an accord on free trade in food crops. In practice however, maize prices at
both consumer (and sometimes producer) level remained a political sensitive issue, subject to
considerable Government interventions, notably export bans 13 . The bans were only partially
effective 14 but appear to have depressed producer prices in surplus-producing areas of
Tanzania, most of which are located adjacent in the Southern Highlands, Kilimanjaro and
Manyara regions, close to the borders with Malawi, Zambia, DRC and Kenya. The bans tend
to disrupt natural trade flows and diminish farmers’ marketing options.
Tanzania’s financial sector has also undergone policy and regulatory reform, affecting both
the commercial banks and the microfinance sector. Government came out strongly in support
of the revival and strengthening of Savings and Credit Cooperative Societies (SACCOS), of
which there are now around 5,000 with 800,000 members. These are the leading MF
institutions in rural areas, but they had been tainted by past politicisation and
mismanagement. The banking sector is in a situation of considerable surplus liquidity and
has increasingly turned its attention towards low income households, with one of them
(CRDB) developing a new business model in partnership with some 400 SACCOS.
Most rural SACCOS are very small, weak and lacking in full-time staff and administrative
capacity, and they are of questionable sustainability (Triodos Facet, 2007). Regulatory
arrangements remain ineffective (despite policy reforms), and they are moreover a major
target of the National Economic Empowerment and Job Creation Programme, which
advances public money to SACCOS, Tz 1 billion (about $770,000) to each of Tanzania’s 21
Regions in its original formulation. Some observers perceive this programme as further
debilitating an already weak movement 15 . A possible means of strengthening SACCOS is to
encourage them to form integrated networks (such as Dunduliza and USAWA) which provide
continuous external monitoring and support, including specialist services like liquidity
management, insurance and auditing, but public policy does not appear to be highly
supportive of this.
Trade-financing initiatives: Tanzania has passed a Warehouse Receipts Act (2005) and
Warehouse Regulations (2006), and has designated a Licensing Board in the Ministry of
Industry, Trade and Marketing, which is receiving technical support from the Common Fund
for Commodities (CFC). This has registered some 20 warehouses (12 for cashew, 5 for
coffee, 2 for cotton and 2 for paddy rice), and plans to establish a fully-fledged licensing
regime. Board staff has played a major role in the organisation of the warehouse receipts
system for cashew and cotton, but have so far had very limited involvement with grain
warehouses.
The WRS has taken off with coffee since the latter 90s and 25% - 30% of the country’s
exports are reported to pass through the system, much of it supplied by POs (farmer business
groups, primary cooperative societies etc.) that bulk on behalf of their members. Parchment
coffee is deposited for processing in designated warehouses (usually coffee curing
13
Some parties believe that the interests of major traders also influences Government interventions, but have not
provided any evidence for this.
14
Between January and May of 2009, the RATIN trade information service recorded informal exports of maize
from Tanzania to Kenya of 44,970 tonnes, approximately half the volume coming from Uganda which had an
open borders policy.
15
One commentator put it thus: “the politicisation of SACCOS and the introduction of cheap government
money in these MFIs have left them very vulnerable to mismanagement and fraud”. Triodos-Facet (2007, p6)
provides information on this programme.
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