Warehouse Receipt Financing & Collateral Management System to Promote Agriculture Financing

1. Warehouse Receipt Financing&Collateral Management System to Promote Agriculture Financing Kashif Umar Thanvi HBL 29 April, 2015 Islamabad

2. Value Chain Financing Instrument System of Warehouse Receipt Personal indemnity Inspection Insurance Warehouse Receipt Warehouse Credit Produce Farmers Trade isn't about goods. Trade is about information. Goods sit in the warehouse until information moves them.” -C. J. Cherryh

3. Landscape • Sizeable portion of Pakistan’s agri-produce is wasted due to inadequate storage facilities, in-efficient supply chain • The security offering for agriculture financing is agriculture land and landless farmers working on leased lands often fail to get formal financing • The rate of informal lending is three fold i.e. at purchase of inputs, at sale of goods and negative weight variation while purchasing of goods • Financial Institutions are reluctant to provide financing to farmers based on agri-produce due to lack of warehousing infrastructure, regulations and information regarding quality and quantity of agri-produce, farmer credit profiling etc. • Growth in Agriculture in FY14 was only 2.1% - much slower as compared to other sectors of the economy

4. 5 3 2 4 8 6 7 1 Farmer with his goods Arrival at Storage Facility Weight & Quantity Checks WHR to Farmer Bank to disburse Payment to Farmer Bank to issue Release Order Re-Payment to Bank Process Release Order Weight & Quantity Checks RELEASE OF GOODS…..

5. Benefits of WHR Financing Model to Farmers • Secure access to credit for farmers • Option to sell during price optimization period • Transparent Price Discovery • Reduction in crop losses • Increased competitiveness

6. Benefits of WHR Financing Model to Banks • Development and augmentation of acceptable collateral • Enhanced reach to small farmers • Better monitoring of stocks through online tools • The fidelity insurance by collateral manager minimizes the risk of staff embezzlement / misconduct

7. Challenges 7

8. Going Forward 8

9. THANK YOU