Warehouse financing to help meet credit needs
This undated handout from the Australian Federal Police released on April 5, 2017 shows crystal methamphetamine being removed from planks of wood at a warehouse in the Melbourne suburb of Nunawading, where it was hidden in 70 boxes of floorboards shipped from China. Cooperation with China and other key drug-producing nations will be bolstered under a new strategy unveiled on September 19, 2017 to combat a flood of crystal meth into Australia that has seen ice use triple in five years. PHOTO: AFP.
The Electronic Warehouse Receipt Financing (EWRF) is an essential component of formal credit for those farmers that lack acceptable collateral for banks, said State Bank of Pakistan (SBP) Governor Reza Baqir.
Speaking at the first meeting of the Task Force on Electronic Warehouse Receipt Financing on Friday, he talked about how strengthening the EWRF regime in Pakistan would play a key role in bridging the gap between supply and demand of agricultural credit and minimising the post-harvest losses.
According to him, it will also ensure better price discovery for the farmers and ultimately increase their profit besides countering food security challenges in the country.
During the meeting, Baqir announced measures to attract investment for the construction of new warehouses/ silos through the SBP’s Financing Facility for Storage of Agricultural Produce (FFSAP) in order to boost the EWRF.
These measures included increasing the tenure of FFSAP loans from the current seven years to 10 years to make it more attractive for investors by creating a long payback period.
Moreover, the SBP increased the grace period from one year up to two years to provide additional flexibility for investors of such projects and to adjust the repayment due to the time lag involved in the construction of new storage facilities.
It further revised the repayment terms of loans from monthly to quarterly or half yearly to align the facility with seasonality in the agriculture sector.
Financing under FFSAP is available at 6% per annum to the end-users on a long-term basis for construction, expansion and balancing, modernisation and replacement (BMR) of steel/ metal/ concrete silos, warehouses and cold storage facilities for storing agricultural produce.
The task force deliberated on the future course of action to enhance the uptake of EWRF in the country.
The discussions focused mainly on ways to enhance and modernise the storage capacity, develop a transparent price discovery mechanism for farmers and enhance the applicability of EWRF to other agricultural commodities including wheat.
The participants also mulled over developing specialised insurance products and conducting the training and capacity building of banks and farming community.
The goal of EWRF is to promote agricultural finance and food security. The task force was established as part of a recent initiative of the SBP to synergise the efforts of all stakeholders for the promotion of EWRF in Pakistan.
Published in The Express Tribune, March 12th, 2022.
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