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

develop the WRS and develop the exchange floor (2006-2010), and Government designated
it WRS regulator under the WRS Act of 2006 and Regulations of 2007 22 . Under this project,
UCE has focused mainly on making the system work with maize and beans, has established
grading standards, implemented a system of electronic warehouse receipts (eWRs) linked to
the South Africa provider (ICX), hired and trained licensing staff (chief warehouse
examiner), and trained banks to use the system. It has so far licensed three warehouses, one
of which by April 2009 had already taken in upwards of 600 tonnes of maize 23 , deposited by
farmers and small traders. WFP had purchased around 150 tonnes of this, and by the end of
August it had procured 358 tonnes.
WFP’s role as a market-maker is of great importance to UCE, as it accounts for most of the
demand for maize of standardised quality and moisture content that meets UCE’s grading
standards and can be safely stored. Some local and regional processors would find it
advantageous to procure a standardised product, if they could get it regularly. Hence if WFP
can kick-start the use of receipted maize and beans, it is likely that demand will pick up in
other quarters 24 . Once the system is working, farmers can adjust variety and quality with a
view to targeting profitable market niches.
Conscious of this situation, UCE approached WFP-Uganda in May 2006, with a view to the
latter procuring a substantial part of its requirements through the exchange floor and with
delivery in the form of warehouse receipts. Discussions moved very slowly but an agreement
was finally signed in late 2008 with the support of the Bill and Melinda Gates Foundation,
which funds WFP’s Purchase for Progress (P4P) Programme, providing for WFP to buy
150,000 tonnes of maize in the form of WRS over a period of three years either by direct
purchase (without tendering) or by forward contract. WFP is planning to finance the
establishment of around ten model warehouses of around 2,000 – 3,000 tonne capacity, with
a view to rolling out the system more widely.
UCE identified a strong need for warehouse receipting with paddy rice, where a number of
people had acquired modern mills but were running them at a small percentage of their
capacity (40 – 100 tonnes paddy per day), but none of them has applied for a license.
Various causes were identified, including lack of motivation (mills are sometimes sidelines)
and a desire to remain in relative informality.
UCE has also licensed a warehouse for holding in-bond merchandise on behalf of a leading
bank. There has also been a successful small-scale pilot with cotton in Kasese, under a CFCfunded
project, whereby primary societies placed their seed cotton under collateral
management while it was stored and toll-ginned prior to the sale of the resulting products
(lint and seed). UCE has also trained exchange brokers and installed a ‘settlement package’
which it may use with receipted commodities (payments will be channelled through a UCE
trust account at the clearing bank, prior to the release of stocks).
UCE also considered regulating conventional collateral management activities, with a view to
raising standards and bringing down the high level of fraud experienced during the present
22 For further details of UCE, see website at www.uce.co.ug
23 UCE reports much larger quantities being traded through these warehouses, much of it for sale to Sudanese
traders, but this was not handled as part of the WRS.
24 The argument for this is laid out in an article by NRI staff (Coulter et al., 2007)
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