GCX Integrates Rural Banks into Warehousing Receipt System

The Ghana Commodity Exchange has successfully begun integrating  Rural and Community Banks  (RCBs) into its Warehouse Receipt Financing (WRF) Programme. So far, five out of the over 140 RCBs operating all around the country, have been integrated into WRF system and  the process can be expected to eventually incorporate most of them into the programme which began eight months ago.

Indeed, GCX under the warehouse receipt financing model has engaged 15 rural and community banks across the country so far, which means 10 more RCBs are already getting set to join the five now fully incorporated – a major step towards developing an efficient and effective  agricultural finance channel for the agriculture sector.

According to the Exchange, the Sissala Rural Bank in Tumu of the Upper West Region is the latest financial institution to join the WRF scheme. Others include the Nsoatreman Rural Bank which joined in October 2019, Builsa Commmunity Bank in February 2020 as well as Success for People in May 2020 and Juaben Rural Bank in July 2020.

The Warehouse Receipt Financing Programme is an innovative way of providing access to finance using the GCX warehouse receipt as sole collateral for accessing  loans. Through this financing scheme, farmers who hitherto would have been required to provide landed property or any other fixed asset as collateral, are no longer required to provide them because the receipt provides collateral under a receivables backed financing model. This is similar to the model COCOBOD uses to secure an international syndicated loan every year, to the tune of at least US$1.3 billion, to pay farmers for the cocoa produce.

Importantly, because the borrowers would sell their produce on the GCX – which provides a ready market – lending risk is seen as relatively low which means that credit terms are better than those insisted on through traditional agricultural financing, where it is even available at all.

The RCBs are currently financing GCX receipts and providing access to financing to small holder farmers, across their areas of operations.

Late last year, the Warehouse Receipt Financing (WRF) Programme was rolled out by the Exchange in partnership with ARB Apex Bank. As part of the arrangement, the ARB Apex Bank set aside over GHc 50 million to commence the programme.

In the pursuit of developing agriculture sector, the Exchange is creating avenues that would encourage mores banks to expand into commodity backed lending.

Currently, the Exchange offers the opportunity to minimize the risk of loss of value of the collateral by monitoring movements in its market value and using margining and price risk management instruments with up to date market data analysis and notifications.

The integrated RCBs can now provide farmers with loans with the farmers using their deposited commodities as sole collateral. Undoubtedly, through the WRF scheme, the livelihoods of farmers as well as depositors of agricultural commodities will be significantly improved.

At the moment, the GCX has indicated that through its Warehouse Receipt Financing scheme, over 150 smallholder farmers have received support to access working capital across the country.

Gradually, as all the RCB s are integrated into the system, small holder farmers nationwide will have relatively easy access to financing, even as the Exchange also offers a ready market for produce sales as well.