Lobbying for the Enactment of a suitable Warehouse Receipt Systems (WRS) Bill - Eastern Africa Grain Council (EAGC)

Warehouse Receipt System (WRS) is a system that promotes aggregation of staple food commodities in economically viable quantities, it reduces transaction costs along the value chain, rewards high quality production of food crops and allows farmers to obtain credit facilities from banks through WRS financing. The government through the National Cereal and Produce Board (NCPB) attempted to introduce the WRS in 2009, but as it was not implemented.

Since its inception in 2006, the East African Grain Council (EAGC) has been championing development and revival of the WRS. So far, EAGC has been successful in establishing WRS in 10 certified warehouses with a combined capacity of 50,000 metric tonnes. A further 10 warehouses have been lined up for certification.

As of 2015, four lending institutions, Equity Bank, Chase Bank, K-Rep Bank and UNAITAS SACCO are extending credit through warehouse receipts. In 2014, Chase Bank approved over KShs. 300 million worth of credit through warehouse receipts and targets KShs. 1 billion in 2015. Equity Bank, although less active, has lent KShs. 20 million through WRS financing. K-Rep and UNAITAS commenced lending through WRS financing. Approximately 13,000 farmers and 200 farmer-based organisations (FBOs) benefited from the WRS being operated by EAGC. Approximately 32,000 metric tonnes by the end of the 2014/15 crop season and more than 30 grain off-takers are working with targeted FBOs to support grain trade through the WRS. WRS financing has proven that farmers are bankable, contrary to popular myths, and can be highly disciplined with money.

The WRS system in Kenya has been operating on the law of contact between banks, EAGC and the warehouse operators. This is particularly limiting because some lenders see the law of contract as not rigorous enough and does not provide a suitable business environment for them to operate.

EAFC has been advocate for well drafted WRS legislation as flawed legislation will affect the whole agriculture value chain creating loopholes which may compromise the system and impede efforts to increase lending to smallholder farmers and traders. Furthermore, it may create additional layers of public sector bureaucracy, which may increase the cost of doing business for producers, traders, processors and other service providers.

As of 2018, advocacy for the Warehouse Receipt System Bill is still ongoing.

For further reading on the issue see the link below.

Warehouse Receipt System Bill 2018

The Warehouse Receipt System Bill, 2018: What It Means for Agribusiness and Financing in Kenya 

Designing warehouse receipt legislation Regulatory options and recent trends

Kenya can use warehouse receipts to boost agriculture 

Share this Issue