WAREHOUSE RECEIPT SYSTEM (WRS)

Terms of Reference (TOR)

• The Presentation is built around areas that SCI is working with SHFs to address the questions: – Is the WRS an appropriate tool for

helping Small Holder Farmers achieve household-level food security? 

– If so, what are the barriers that need to be overcome? 

– And if not, what are the alternatives that might be better suited to reach SHFs?

SCI Operational areas for the Food Security and Livelihood Program

• Currently SC is working with farmers in Zomba, Chiradzulu, Neno and will soon be working in Blantyre districts where populations are high and smallholder farmers land is not only small with eroded soil fertility but also fragmented.

Important factors to know

• Most smallholder farmers in the areas mentioned face food insecurity and organised marketing shortfalls some of which are:– Level of production and productivity: Most of the

smallholder farmers produce at subsistence levels, and hardly produce enough to last the year. On average, households in Chiradzulu, Zomba and surrounding districts produce 7 bags (350kgs) of maize per average plot size of 0.3ha, even amid government FISP intervention which takes them only up to December after which they start buying or scavenging for survival.

– In these areas, there has been persistent food shortage. MVAC assessments have over a number of years responded to missing food entitlements. i.e. SCI is operating in a food deficit zone. As such have hardly enough to market in substantial quantities.

Important factor to know….continued

– Cash requirements: The characteristics of smallholder farmers in these areas derive their livelihoods from agriculture and have a lot of immediate cash needs early in the harvest season. They as such fall vulnerable to unorganized market systems favoring vending who unfortunately take advantage of their immediate cash needs to offer ready cash on spot but very low prices because of lack of grading and sorting. Grading is a problem in crops like pigeon peas of which usually farmers produce in different varieties leading to mixed products. However to reach minimum quantities to be bought by WRS operators, different varieties from different farmers are mixed. This result in very low prices realized.

Important factor to know….continued

• Per capita land holdings being so small for Southern Region districts of Malawi (an average of 0.3 ha for Zomba and Chiradzulu)

• In Chiradzulu and Zomba where SC operated under WALA and Barilla, crops offered for sale include soya, maize, groundnuts and pigeon peas. Volumes for these crops are further affected by post-harvest losses which can be put at 25% in areas that SC worked in.

Reasons for low Warehousing Receipt System (WRS) adoption in SCI areas.

• Requires high capital outlays to have one constructed. Normally assisted by external organisations, so local ownership is compromised.

• Requires constant periodic maintenance, handling and storage costs and a reliable and educated paid staff to offer management and security of the structures and the commodities.

• Farmers are not assured of getting back the commodities they brought to the warehouse and gets discouraged if they get commodities of inferior type.

Reasons for low Warehousing Receipt System (WRS) adoption in SCI areas.

• Loans offered by external Microfinance Institutions charge high lending rates and interests that farmers are not in control over when compared with VSLs. Farmers prefer accessing their money from these groups because they have ownership of the financing facility, has a social factor and the interests/profits realized are used in the same community.– Credit and loan experts do not recommend loans for immediate

household consumption that does not generate profits. Therefore warehouse receipt loans have not provided a suitable facility to meet the immediate cash. Doing so belabors the farmers to get money elsewhere to pay back for the loans. Loans are recommended for boosting businesses which have a high potential for payback including interests. So loans provided through warehouse receipt system do not offer immediate relief from immediate household consumption needs.

WRS is possible……..

• If collaborative efforts with Farmer organisations such as NASFAM and FUM for better farmer organization in cooperatives and taking farming as a business other than producing for subsistence.

• If current household productivity levels are increased in order that families have surplus for sale. This entails enhanced agriculture extension system, access and availability of production inputs (improved seeds, fertilizers, mechanized or draught animal drawn implements and chemicals), sustainable land and water management addressing soil fertility and water management (irrigation)

• If WRS loans were interest free or if the farmers were involved in owning the financing facility – as shareholders where they are involved in decision making. Or alternative crop financing systems (VSL and soft loans) are available to meet the farmers immediate cash needs at harvest time with minimum interests.

• If improved governance systems were put in place ensuring that the security systems are improved and farmers have assurance of the safety for their crops once aggregated for markets and local consumption at a later stage once prices have improved.

WRS is possible……..continued.

• If the Warehouses were used as a one stop center for the farmers where input and output markets are provided. Pretty much the ADMARC concept. This would make the facility yield greater benefits.

• If the warehouse is constructed within the community served to supply the commodities in their localities. Currently the increase handling and transportation costs means the end user suffers the costs.

• There needs to be an enhanced civic education and public sensitization on the warehouse Receipt system need to be undertaken.