Warrantage Inventory and Credit System

Grain in the Bank: Future Assurance

The warrantage inventory and credit system is a practical solution for small-scale farmers. It operates through a warehouse receipt mechanism, allowing farmers to store non-perishable crops (such as millet) in secure warehouses. In return, they receive inventory credit—loans against the stored grain. If farmers default, the grain is sold to recover the loan. This system provides several benefits: farmers gain from rising prices during scarcity, address urgent financial needs, pool resources for collective purchases, and engage in income-generating activities during the dry season. Implementation requires clean, secure warehouse facilities, equity injection for lending, and policy alignment to recognize agricultural produce as collateral. By minimizing risk and promoting financial inclusion, warrantage empowers smallholder families and strengthens rural economies.

This technology is TAAT1 validated.

8•9

Scaling readiness: idea maturity 8/9; level of use 9/9

Adults 18 and over: Positive high

The poor: Positive medium

Under 18: Positive high

Women: Positive high

Farmer climate change readiness: Significant improvement

Problem

Limited Access to Credit: Smallholder farmers often struggle to access credit due to lack of collateral or formal financial history.
Price Volatility: Agricultural markets can be volatile, leading to uncertainty for farmers regarding the prices they will receive for their crops.
Seasonal Cash Flow: Many smallholder farmers experience fluctuations in income throughout the year, which can make it difficult to cover expenses during low-income periods.
Limited Market Access: Without access to secure storage facilities, farmers may be forced to sell their produce immediately after harvest, often at unfavorable prices.

Solution

Access to Credit: By allowing farmers to use stored crops as collateral, warrantage provides them with access to credit, overcoming the barrier of limited collateral or formal financial history.
Price Stability: Warrantage enables farmers to store their crops during times of excess supply and sell them when prices are favorable, reducing the impact of price volatility and uncertainty.
Cash Flow Management: With warrantage, farmers can access credit when needed, helping them address urgent financial needs during low-income periods and smoothing out cash flow fluctuations.
Market Access: By providing secure storage facilities, warrantage allows farmers to store their produce and sell it when market conditions are favorable, avoiding the need to sell immediately after harvest at unfavorable prices.

Key points to design your project

The warrantage system is highly suitable for smallholder farming communities from Sub-Saharan Africa that lack favorable bank lending for agricultural investment. It’s important to note that the operational framework to implement a warrantage inventory credit system involves several key steps and requires the involvement of various stakeholders, including farmers, warehouse operators, and loan issuers. The system has been demonstrated and promoted in countries like Burkina Faso, Mali, and Niger with encouraging results.

Here are the steps of implementing a warrantage system:

Identify a Farmer Group: Find a group of farmers who are interested in the warrantage system.
Training: Train the farmers on how the system works, including how to store their crops properly and how to negotiate prices.
Find a Warehouse: Secure a clean, safe place to store the crops. This could be a rented facility or a specially built one.
Store the Crops: After harvest, the farmers store their crops in the warehouse. The quality and quantity of the crops are recorded.
Get a Loan: The stored crops act as collateral for a loan from a bank or microfinance institution. The loan amount is usually less than the value of the stored crops.
Invest the Loan: The farmers use the loan to invest in their farms or meet other financial needs.
Sell the Crops: When market prices are favorable, the farmers sell their stored crops.
Repay the Loan: After selling their crops, the farmers repay the loan. If there’s any profit left, it’s shared among the farmers.

Cost: $$$ 0.25—0.5 USD

Woven polypropylene 90-kg bags:

ROI: $$$ 52—34 %

income increase

1—2 USD

90-kg hermetic bags

IP

Open source / open access

Countries with a green colour: Tested & adopted
Countries with a bright green colour: Adopted
Countries with a yellow colour: Tested

Countries where the technology has been tested and adopted
Country	Tested	Adopted
Burkina Faso	Tested	Adopted
Mali	Tested	Adopted
Niger	Tested	Adopted
Nigeria	Tested	Adopted
Senegal	Tested	Adopted

This technology can be used in the colored agro-ecological zones. Any zones shown in white are not suitable for this technology.

Agro-ecological zones where this technology can be used
AEZ	Subtropic - warm	Subtropic - cool	Tropic - warm	Tropic - cool
Arid	–	–	–	–
Semiarid	–		–
Subhumid	–		–
Humid

Source: HarvestChoice/IFPRI 2009

The United Nations Sustainable Development Goals that are applicable to this technology.

Goal 1: no poverty

Goal 2: zero hunger

Goal 5: gender equality

Identify a Farmer Group: Find a group of farmers who are interested in the warrantage system.
Training: Train the farmers on how the system works, including how to store their crops properly and how to negotiate prices.
Find a Warehouse: Secure a clean, safe place to store the crops. This could be a rented facility or a specially built one.
Store the Crops: After harvest, the farmers store their crops in the warehouse. The quality and quantity of the crops are recorded.
Get a Loan: The stored crops act as collateral for a loan from a bank or microfinance institution. The loan amount is usually less than the value of the stored crops.
Invest the Loan: The farmers use the loan to invest in their farms or meet other financial needs.
Sell the Crops: When market prices are favorable, the farmers sell their stored crops.
Repay the Loan: After selling their crops, the farmers repay the loan. If there’s any profit left, it’s shared among the farmers.