Capital is the engine and source of financing for any business. Sometimes you may think that you need a loan from a money shark to help you meet your operation costs forgetting that you are going to experience tough terms that may lead you to loss of your collateral due to high-interest rates.
These days, the government came up with a good system to help mostly owners of commodities who include: cooperatives, village traders, urban traders, and millers to access cheap credit after depositing your coffee, maize etc in the warehouses. This system is called the WAREHOUSE RECEIPT SYSTEM.
Here are the steps for the system:
STEP 1: The owners of commodities bulk and bag good quality (well dried, foreign matter and bad odour free) and deliver to the warehouse, It is checked and if it passes,it is accepted and stored,
STEP 2: The warehouse receipt is made and presented to the depositor (farmer/trader)
STEP 3: A depositor wins an intention to borrow then presents the receipt to the preferred Financial institutions and negotiates credit.
STEP 4: The financial institution cross-checks with the warehouse keeper for the authenticity of the receipt.
STEP 5: The warehouse keeper provides authentic information to the financial institutions.
STEP 6: The financial institutions then extend a loan facility to the depositor came borrower.
Once the depositor is offered a favourable price, he/she is at liberty to sell to whoever, and stocks can only be released to the new owner after all parties with a stake in the commodities have been settled (e.g. lender, warehouse operator, etc.)
This system can ably help our people in the agriculture value chain in order to maximize higher returns in investment. When agriculture becomes so profitable,it will help many people including youths to get employed to the sector.
Please kindly share this knowledge and information because knowledge is wealth.
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The author; Ben Ssebuguzi is an entrepreneur and economist.
