Business

Farmers to borrow against their produce

KABANDA CHULU, Lusaka
FARMERS will now access inputs on credit from agro-dealers using the warehouse receipt as collateral, following the introduction of the input financing product by the Zambia Agriculture Commodities Exchange (ZAMACE).
ZAMACE has started offering the input financing against warehouse receipts as a new product on the agricultural commodity exchange.
According to information posted on the ZAMACE website, the development will allow farmers to buy inputs on credit from an input supplier-company using the warehouse receipt as collateral.
“The warehouse receipt reflects the details of the deposited grains in a ZAMACE Certified Warehouse equivalent to the cost of the inputs, calculated at the prevailing market price of the commodity.“At the end of the day, small-scale farmers have been given a transparent platform that effectively allows them to assess the market for fair prices, and the collateralisation of farm produce has of course now made it possible for the farmers to borrow against their produce,” it stated.
It stated that the participation of First National Bank (FNB) Zambia on the ZAMACE has allowed for a secure and efficient payment system where the bank’s digital banking platforms are facilitating the payment processes and improving the experience of trading grain through the commodity exchange.
“ZAMACE, which currently only has FNB Zambia as the participating bank, has facilitated for farmers to borrow against their maize if they do not need to sell their produce immediately after harvesting when the market is depressed.
“This delayed sale of produce allows farmers to benefit from the seasonal rise in commodity prices, which occurs in the case of maize,” it stated.
With Zambia’s annual maize production of around 2.9 million tonnes, a modest 20 percent of the crop financed under the warehouse receipt system would constitute a financing opportunity of around US$100 million (based on a conservative maize price of US$170 per tonne).
“If other commodities are included such as soybeans, wheat, among other grains, the potential opportunity could grow to a financing opportunity of US$150 million per annum.
“This is enough potential to warrant other banks joining FNB Zambia as participating banks on the commodities exchange. There is also enough potential to attract other warehouse owners, particularly away from the line of rail, to register with ZAMACE and start offering secure warehousing for agricultural produce,” it stated.

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