Ghanaian farmers are set to enjoy better prices for their produce following the introduction of the regulated Ghana Warehouse Receipt System (WRS) project.
With the new system, farmers now can postpone sales until when the market is more profitable.
The WRS project being implemented under the auspices of the International Finance Corporation (IFC)/ World Bank Group, with funding by the Swiss State Secretariat for Economic Affairs (SECO), is part of the financial inclusion programme to help farmers to be able to access credit and provide avenue for them to market selected harvested foodstuffs.
It also seeks to help increase farmer revenues through a transparent price discovery mechanism, contribute to lowering post-harvest losses due to better storage warehouses and support the agricultural sector by providing banks with liquidity or risk coverage backed by warehouse receipts.
The project will also smoothen market prices by facilitating sales throughout the year rather than just after harvests and increase market power of smallholders by enabling them to choose the time to sell their crops.
Rationale for project
This comes on the backdrop of smallholder farmers lacking access to market information while traders are undercapitalised and, therefore unable to store surplus produce after harvest.
This leads to a glut which often results in low farm-gate prices and erodes the income of poor households and smallholder farmers. It also exposes them to food insecurity.
At a media workshop in Kumasi to provide a better understanding of the regulated Ghana WRS project, and of the warehousing and storage capacity challenges in Ghana, the Communication Consultant on the project, Mr Charles Mawusi, said the project would create and maintain a more enabling policy and regulatory framework for trade in agricultural commodities.
He said for farmers, it would provide incentives to improve post-harvest quality because warehouses would only certify top quality products.
"They will also have easier access to loans collateralised by certified warehouse receipts. For the farmer based organisations, it removes all position-takers between the farmer/trader and the end market," he said.
He added that for the financial institution, the WRS would mitigate risk because the receipt insured against loss of quality, theft and fire. For consumers it would offer access to ear-round grain of assured quality at relatively lower prices, and for traders and processors,na reduced risk of grain contamination.
He explained that ultimately it would provide a foundation for a functional commodity exchange.
A warehouse receipt is a document that provides proof of ownership of commodities of a given quantity, quality and value stored in a warehouse by a depositor, and if negotiable can be used as collateral for loans from a bank.
Thus, a WRS provides farmers, traders aggregators and processors with reliable public storage facilities; provides a financing system to depositors of commodities in public warehouses using securely stored goods as loan collateral (access to credit); and a system that provides depositors a marketing platform to market their commodities using warehouse receipts.
Ultimately, it provides a foundation for a functional commodity exchange.
Among the components of the regulated WRS include stakeholder capacity building, awareness creation on pre/post regulations enactment and strengthening the WRS regulatory framework.