Does Warehouse Receipt Financing Benefit Ghanaian Smallholders?

Proponents of warehouse receipt systems argue that they benefit smallholder farmers by allowing them to store surplus grains in a secure facility to sell later in the season when prices tend to be higher. In the interim, receipt holders can use the stored commodity as collateral to secure loans to finance household consumption and investment needs. However, in practice, warehouse receipt financing appears to be less attractive to smallholders than anticipated; for example, in Ghana, as elsewhere, warehouse receipts have almost exclusively been used by large traders, processors and exporters.

 A new GSSP Policy Note by Mario Miranda and others explores the mechanics of warehouse receipt financing in Ghana and presents policy prescriptions that may make the system more accessible and beneficial to smallholder farmers. At the heart of the problem is the fact that the seasonal price gain for grains is insufficient to cover warehouse receipt system transactions costs such as storage, logistics and finance charges, despite the guarantee of zero crop losses while in storage. Possible interventions may include reducing storage and financing costs, and ensuring that the market recognizes the quality premium of grains stored in certified warehouses. To download full document, click here.