Warrantage systems

Under warrantage systems, farmers pool their grain for storage after harvest, against which cash loans are issued, allowing the collective to buy inputs. When grain prices rise, farmers sell their stored stock to pay back loans. The FAO have established 50 warrantage schemes in the Sahel, including 250 input stores and hundreds of grain stores benefiting 13,000 farm households over the past fifteen years.70

Warehouse receipt systems

Warehouse receipt systems involve the storing of a predefined quality of produce in a warehouse operated by a third party, allowing farmers to use the receipt of this storage as collateral. These systems help smallholders access financial institutions that are more willing to make loans because their transaction costs (e.g., ensuring product quality) are reduced. A warehouse receipt system in Tanzania was first piloted in 2001 and is supported by two IFAD-funded programs: the Agricultural Marketing Systems Development Programme, which established and managed the storage facilities, and the Rural Financial Services of Savings and Credit Cooperative Societies (SACCOs) formed by local communities. Once a farmer has stored his/her produce, he/she can obtain a loan from a SACCO of up to 70 percent of the value of the stored goods. The Tanzanian government passed the Warehouse Receipt System Act 2005 to expand the system across the whole country.71

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