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

eported as “remaining active” 30 , but it will require several years to have a mature evaluation.
In the latter case, the POs (20-30 farmers strong) were federated in brokerage groups called
Depot Committees (10 POs each), and there was no attempt to federate them regionally and
nationally.
This is a topic on which the author has researched and published in the past (see Stringfellow
et al., 1997; Coulter, 2007), and he sought further expert opinion during this assignment.
This led to the following conclusion:
• POs have some innate problems making them difficult to organise with smallholders.
Here it is instructive to quote an interviewee in Madagascar, who sought to explain why
MF networks had performed so much better than marketing POs in that country: POs are
too close to the informal private trade with which they are trying to compete. Prices are
subject of day to day bargaining, and this offers cooperative leaders many opportunities
for private gain. MFIs have two distinct advantages, firstly their strict financial
discipline, and secondly the major distance between lending rates in the formal and
informal sectors meant that they are effectively segmented, and there is little opportunity
for arbitrage between the two.
• there is a trade-off between scale-economies and governance (smaller primary groups =
greater accountability)
• it is easier to organise them with higher than with lower value crops, and
• they tend to be more successful under contract-farming arrangements, where an outside
sponsor has a vested interest in their survival. Due to the high risk of contractual default,
contract farming hardly exists with grains and other lower-value food crops.
At the same time the experience to date with regulated WRS in Tanzania 31 and Uganda,
suggests that grass-root POs engaged in simple bulking activities may get a new lease of life
by working in combination with public warehouses, i.e. under Approaches 1.A–1.C.
Approach 3B: Seasonal storage by farmers, supported by microfinance
Francophone countries have pioneered this approach as they have established credit unions
with the support of European and Canadian sponsors. They have generally opted for highly
structured networks, where the local branch (caisse) is an integral part of the regional union
and the unions are likewise federated at national level. Stocks held in warehouses under
‘dual key’ arrangements 32 , normally in the name of individual depositors, who use their credit
to finance a variety of revenue-earning activities in the post-harvest period, including the
acquisition of inputs for the production of the next year’s crop of the commodity stored, or
for consumption purposes. It is in Madagascar that this system has been most fully
developed, using paddy rice as the main commodity, while Niger has pioneered the approach
in West Africa. The approach is also being implemented in Tanzania, with some notable
variants, notably the employment of collateral managers at the warehousing sites, and freestanding
SACCOS (instead of networks) working in partnership with financing banks, and
with the employment of a collateral manager at the site.
30
Source: End of Project Report. While pointing to the project’s successes, this report was critical of an
excessively target/numbers-driven approach
31
In Tanzania participating POs also facilitated access to production finance (Gideon Onumah, NRI, pers.
comm.)
32
One key held by the group of borrowers, one by the lender
42