5 Rural Banks integrated onto the GCX warehousing receipt system… 10 more expected soon
Adnan Adams Mohammed
At least five Rural and Community Banks (RCBs) out of the
over 140 RCBs in the country have successfully begun integrating onto the
Warehouse Receipt Financing (WRF) Programme of the Ghana Commodity Exchange
(GCX).
GCX is hopefully the process will soon integrate most of
RCBs into the programme which began eight months ago. About 15 RCBs have been
engaged already across the country so far, which means, about 10 more RCBs are
already getting set to join the five now fully incorporated – a major step
towards developing an efficient and effective agricultural finance channel for
the agriculture sector.
According to the Exchange, the Sissala Rural Bank in Tumu of
the Upper West Region is the latest financial institution to join the WRF
scheme.
Others include the Nsoatreman Rural Bank which joined in
October 2019, Builsa Community Bank in February 2020 as well as Success for
People in May 2020 and Juaben Rural Bank in July 2020.
The Warehouse Receipt Financing Programme is an innovative
way of providing access to finance using the GCX warehouse receipt as sole
collateral for accessing loans.
Through this financing scheme, farmers who hitherto would
have been required to provide landed property or any other fixed asset as
collateral, are no longer required to provide them because the receipt provides
collateral under receivables backed financing model.
This is similar to the model COCOBOD uses to secure an
international syndicated loan every year, to the tune of at least US$1.3
billion, to pay farmers for the cocoa produce.
Importantly, because the borrowers would sell their produce
on the GCX – which provides a ready market – lending risk is seen as relatively
low which means that credit terms are better than those insisted on through
traditional agricultural financing, where it is even available at all.
The RCBs are currently financing GCX receipts and providing
access to financing to smallholder farmers, across their areas of operations.
Late last year, the Warehouse Receipt Financing (WRF)
Programme was rolled out by the Exchange in partnership with ARB Apex Bank. As
part of the arrangement, the ARB Apex Bank set aside over GH¢50 million to
commence the programme.
In the pursuit of developing agriculture sector, the
Exchange is creating avenues that would encourage more banks to expand into
commodity backed lending.
Currently, the Exchange offers the opportunity to minimize
the risk of loss of value of the collateral by monitoring movements in its
market value and using margining and price risk management instruments with up
to date market data analysis and notifications.
The integrated RCBs can now provide farmers with loans with
the farmers using their deposited commodities as sole collateral.
Undoubtedly, through the WRF scheme, the livelihoods of farmers
as well as depositors of agricultural commodities will be significantly
improved.
At the moment, the GCX has indicated that through its
Warehouse Receipt Financing scheme, over 150 smallholder farmers have received
support to access working capital across the country.
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