Warehouse Receipts Programme / Agricultural Commodity Financing Programme
The term Warehouse Receipts Programme embodies the Agribusiness Team’s overall financing activity against agricultural commodities, whether or not such credits are secured by a pledge of warehouse receipts (WHR). WHR allow agricultural producers and processors to obtain working capital by using agricultural products stored in licensed warehouses as collateral. In countries where legal and regulatory provisions applicable to WHR are satisfactory to the Bank, such financings may include a degree of domestic operating risk. In all other situations, when WHR legislation is either non-existent or inadequate, the underlying rationale has usually been to promote this instrument and to strive to move legal transition forward through policy dialogue and technical assistance. Acknowledging this shift in the scope of the programme, the Agribusiness Team renamed the WHRP the Agricultural Commodity Financing Programme (ACFP) when updating the Board of the EBRD in January 2004.
Two important aspects of the Bank’s sponsored ACFP are discussed in this special study and give rise to important recommendations:
- WHR are designed to provide a level of comfort from a credit standpoint since the creditor/holder of such a document should be able to secure, release and liquidate the financed goods on demand, thereby avoiding any court procedures. Such out of court enforcement procedures are, however, possibly open to legal challenge. Although this is an unlikely situation, it has not yet been tested and expert local legal advice should help to mitigate this risk.
- Indemnity funds are intended to cover non-insurable fraud risk. Unfortunately, these have proven difficult to set up and, since no claim has yet been made against the few existing indemnity funds, this is also an untested area.