Warehouse Receipt Systems for food security and resilience building

1. Warehouse Receipt Systems
for food security and
resilience building
Mtendere Mchakama

2. Food, Income and Markets Programme
• Five-year programme in three
districts (Lilongwe, Nkhotakota,
and Nsanje)
• Targets 21,000 poor and
extremely poor smallholder
farmers
• Overall goal is to enable poor
and vulnerable households to
achieve adequate and
sustainable access to resource
and livelihoods necessary to
achieve their rights

3. Most pressing needs for smallholder farmers
1. Farm inputs e.g. Seed, Fertilizer
2. Capacity Building
 Technical knowledge in good agriculture practices
 Agribusiness Management Skills
 Access to good markets
3. Access to Financial Services
 Savings
 Credit

4. Does WRS play a role in meeting those needs?
1. Markets
 Link farmers with reliable buyers
 Provides platform where farmers get better commodity
prices
 Provides market information
2. Finance
 Provide receipt for accessing credit with banks
 More sales income leads to more savings by farmers
3. Farm Inputs
 More sales means farmers more able to acquire farm
inputs

5. Concern’s experience – linking farmers to AHCX
 Group name: Umodzi Revolving
Fund
 Members: 250 poor and very poor
smallholder farmers
 162 (99 female) of 250 members
participated in selling through AHCX
Ltd – WRS
 Group formed through Mwansambo
Youth Organization, Nkhotakota
District
 Crop sold: Groundnuts
 Year of participation: 2013

6. Process – linking farmers
Planning meetings with
AHXC
Introduction of AHXC
marketing team to farmers
Informing farmers and
giving time to make decision

7. Farmers’ group experiences
18,220 kg
harvested
and stored in
local
warehouse
15,220 kg
transported
to Lilongwe
Group
notified of
grading/sale
price after
two weeks
Receipt used
to leverage
loan from
local bank
Loan used to
purchase
inputs for
growing
season
Member
checked
prices, and
sale done
when target
was close

8. Results
ACHX Service Charges Unit Unit Cost (MK) # Units Total Cost (MK)
Per Person costs
(n=162)
Storage Per day 450 111 49,950
Storage Per day 7 122 805
AHCX Commission Net 2.00% income: MK 99,018 4,508,018
1 99,018
Member Fee 1.00% 49,509 1 49,509
Handling Fee Lump sum 4,000 1 4,000
Grading by ARET Per MT 500 15 7,610
Total Deducted by AHCX 210,892 1,302
Other Costs
Packaging 50kg sacks 133 300 39,990
Truck hire 15 MT truck 130,000 1 130,000
Interest on loan Lump sum 122,000 1 62,000
Total Other Costs 231,990 1,432
Total Associated Costs 442,882 2,734
Estimated income if sold at harvest locally: MK 3,348,400
VALUE ADDED: MK 1,159,618 (35%)
Gross Income (sale of gnuts) 4,950,900 30,561
Net Income (less costs) 4,508,018 27,827
Est. income if sold at harvest locally 3,348,400 20,669
Value Added (Amount) 1,159,618 7,158
Value Added (%) 35% 35%

9. What Worked
1. Unit Selling Prices increased at AHCX from time of crop deposit
to sale 11th July, MK325/kg 31st Oct, MK345/kg 11th Nov 2013)
2. Accessed MK650,000 credit with Malawi Savings Bank (MSB)
using Warehouse Receipt
3. Accessed market information through mobile phone
4. Avoided post – harvest losses
5. Got certified grading of G/Nuts by ARET

10. Understanding the needs and concerns of local farmers
Despite a positive return on investment, with 35%
value added, farmers chose not to repeat their
engagement with AHXC again this year
Why?

11. Results from follow-up discussions
1. Four months waiting for sale seemed long time for the very
poor
 Produce was assembled by end June at Mwansambo
 The very poor wanted to cash in sooner than the poor
 Farmers counted on having influx of cash in order to be
able to carry out other small enterprises during the pre-planting
season; the delay represented a missed
opportunity to them
2. Inconsistencies in quality of G/Nuts of members leading to
lower grade
 Group thought they would get higher grade

12. Recommendations
1. Continue with the system because of the benefits gained
2. AHCX can use district farm forums for more SHFs outreach in rural
areas; important to be very clear about costs and timelines
3. Target existing SHFs cooperatives and associations
4. Build capacity in good agriculture practices and agribusiness
management skills for Cooperatives and Associations
5. Several interested SHF groups can join together to meet minimum
requirements
6. Careful recording of each individual’s consignment to avoid mixed
grading
7. Access to credit to continue to cater for immediate financial needs of
very poor

13. Thank You
A presentation to Karina Howley, KPMG — 4th April 2011