Ghana: Inventory Credit for Small-Scale Farmers

This brief profile starts by summarising the main benefits of the warehouse receipt system, which are providing a source of collateral to facilitate access to credit (hence its alternative name of inventory credit) and moderating seasonal price variability, plus the side benefits of improving standards of weights and measures, increasing awareness of quality and developing grading systems. It goes on to note that in those countries that do not have trusted warehouse operators and where the regulatory and supervisory capacity is weak, the use of the methodology is limited. Where it has been successful it has generally excluded small scale farmers.

The profile goes on to introduce the Ghana inventory credit project as an example of a scheme which deliberately set out to assist small scale farmers to take advantage of seasonal price swings in the maize market to improve their incomes. It was started in 1989. Farmers form groups of 20 – 50 members to store their produce in a warehouse operated by TechnoServe, a private company. The farmers are given a receipt stating the quantity and quality of the goods deposited, which enables them to get a loan to disburse to the group members. Each farmer’s account is tracked individually by the group, although the grain is the collective property of the group once it is warehoused and they are jointly responsible for its subsequent treatment, storage and sale.

By the late 1990s the scheme was assisting over 100 farmer groups with loans in excess of $170,000. Repayment rates were close to 100%. This encouraged the Agricultural Development Bank of Ghana to introduce large scale commercial inventory credit schemes which has dramatically reduced inter-seasonal price fluctuations in the country. This has consequently reduced the value of the system as inventory credit is only profitable when the increase in the value of the stored goods exceeds the cost of storage and borrowed funds. To survive the service provider will need to increase warehouse volumes, reduce costs, or consider diversifying into other products.

This note suggests that warehouse receipt systems may be viewed more as a means of increasing the efficiency of markets that as an end in itself.

  • Resource type
  • Author World Bank
  • Organisation
  • Year of Publication2004
  • Region
  • Country
  • LanguageEnglish
  • Number of pages2 pp.
  • EditionAgricultural Investment Sourcebook

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