AS more of
Sophisticated trading systems already exist for export commodities such as coffee and cut flowers. But for staple commodities, such systems are still in their infancy in most African countries.
According to the 2013 structured grain systems in
The grain is graded according to a set of agreed standards, and it is stored safely in a trusted warehouse. These two things make it possible for the owner to use the grain as collateral for a loan before it is sold. Moreover, the grain can be sold without having to move it out of the warehouse.
And it can be traded on a commodity exchange, where buyers and sellers can agree on a deal without having to physically inspect the grain.
"This has huge advantages for everyone involved. Farmers have a more assured market, and can sell the grain when the price is right.
For traders, buying and selling is easier, less risky, and more efficient. Buyers have a more reliable supply, assured quality, and a broader range of potential suppliers.
Costs and wastage are lower; income for everyone involved can be higher," the report read in part. To succeed, structured grain trading needs a conducive policy environment that levels the playing field and allows the market forces of supply and demand to support a transparent process of price determination.
That means halting bans on exports and imports, and avoiding interventions in prices, procurement and distribution. By explaining how structured trade works in a clear manner, this manual should help those involved in setting policies to avoid unpredictable interventions that disrupt the smooth and efficient working of markets.
It will also support them to put in place a policy framework that is conducive to developing the institutions needed for structured trade. Currently in
Mr Wangwe while pressing for African countries to adopt warehousing receipt systems also advocated for the adoption of a new concept of Collateral Management Services (CMS) and how they will benefit the banking sector being the major enabler to agriculture finance.
Collateral as understood in Indian banking parlance is secondary source of payment obligations while in the present context is an asset / 3rd party commitment accepted by the Collateral Taker (Bank) to secure an obligation of the Collateral Provider. Collateral Management (CM) involves managing the collateral on behalf of the collateral taker. CM transactions are intended to protect against performance risk of counter party.
Banks have traditionally been assets based lenders -with hardly any knowledge of asset financed. Banks, private and public are under pressure to expand agri credit portfolio, sound collateral management therefore is becoming a major enabler. At the same conference
Agricultural Market and Post-Harvest Economics Specialist, Mr
"So what I am saying is that the regulatory body needs to be able to close the warehouse if the assets of the farmers are in danger of being compromised and this should be done without the fear of stepping on some big toes," he said.
In a study prepared by
Other findings showed that concerns of implications of a
This puts them in a position where they can act as collateral managers. In this position, they can guarantee the quality and quantity of the grain in the store and can hold grain on behalf of a financier or buyer.
Plus, they offer professional services. Keeping grain in a commercial warehouse minimizes the risk for commodity financiers and buyers, and puts warehouse operators in a unique position in structured trade systems.
Such warehouses make it possible for farmers, traders and buyers to transfer ownership of the grain without having to move it. This makes warehouse receipt systems and commodity exchanges possible.
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