In 2006, in response to challenges in the post-harvest value chain voiced by their members, the Kazhi Kadaimadai Farmers Federation (KKFF) began implementing a delayed marketing and warehouse receipts program. Out of loans accessed from local banks as well as funds generated from membership dues, KKFF provided bridge loans to select farmer groups who stored their harvest in KKFF-owned warehouses for a fee of 10 rupees (approximately $0.22) per bag per month. KKFF’s bridge loan model was based on a warehouse receipts model where the amount loaned to farmers was 80% of the value of their commodity stored in the warehouse. A 12% annual interest rate was charged for each loan provided.
Commodity value was determined by KKFF’s Warehouse Management Committee, which followed industry valuation guidelines. The value of the stored produce was determined by the market price alert on the day that it was brought to the warehouse. In addition, the following criteria were used for valuation:
- The amount of soil and stones in sampled bags
- The amount of moisture in sampled bags (using a moisture meter)
- The amount of husk and other particles in sampled bags
- The ratio of small seed to large seed
Valuation was conducted in the presence of the farmers with any disputes settled through KKFF’s Board.
KKFF members were permitted to store their harvest for a period of four to six months while they waited for market prices to stabilize. The smallest amount that a member could store to qualify for a bridge loan was one 60 kg bag of rice while the maximum amount depended on the current available space in the warehouse.
Although KKFF currently manages all activities related to their warehouse receipts program, they hope, in the next two years, to expand their program to incorporate private warehousing companies and local financial institutions to ensure better integration in the rural agricultural value chain.
To view a video about KKFF’s warehouse receipts program as well as their other value-added services, please click here.