Banks lend out K500m to farmers through warehouse receipts

Farmers in the country have received over K500 million (about $1.3m) in loans from commercial banks through the Auction Holdings Commodity Exchange (AHCX) warehouse receipt financing system.

“Our figures show that between 2013 and 2014 farmers who deposit their crops with us have taken loans amounting to K500 million. This is very unprecedented because it is a direct injection of capital to the smallholder farmer and we are very optimistic that it will boost agriculture in the country,” said AHCX head of operations Davie Lockie.

AHCX is a market place where buyers and sellers deal in commodities with assurance on quality, delivery and payment.

The exchange was set up to ensure that the market has the integrity, by providing a guarantee mechanism for the quality, quantity and payments of produce.

Lockie said in an interview in Lilongwe on Tuesday that most small-scale farmers who did not have bank accounts are now bankable because of the commodity exchange.

“When we just started the required quantity for produce that we were getting from farmers was three metric tonnes which is almost 60 50kg maize bags. After some farmers contacted us that the amount was big we reduced the quantity to one metric tons about 20 bags of 50kg each,” said Lockie.

He said with this decision a lot of farmers deposited their crops with the organisation and most of them have managed to get loans from banks through receipt financing.

“You see, small farmers need cash all the time to meet their obligations and through warehouse receipting they are being assisted greatly. If a farmer deposits hisor her crops with us he or she is not forced to sale the crops the same day. The farmer decides when he wants his produce can be sold but he is at liberty to get a loan from a bank equivalent to the produce deposited in our warehouses,” said Lockie.

Lockie said so far AHCX has set up warehouses in almost all the regions of the country and this has increased the bankable population by about 20 percent.

He, however, advised banks to consider the interest rates for the farmers loans because the company already insured the crops and banks cannot suffer any loss in the event of an accident.

“When a farmer has deposited his or her crops with us the crops are comprehensively insured and incase of an accident the banks will lose nothing,” said Lockie.