Implementing Effective Warehouse Receipt Financing Systems : Lessons from a Pilot WRS Project in the Senegal River Valley

Warehouse receipt financing systems (WRS) are financial arrangements which allow farmers to store their agricultural production in a certified warehouse in exchange for a warehousing receipt that can serve as a collateral for receiving credit in a formal financial institution (bank or micro-finance institution). WRS have received increasing attention in recent years as a way to release capital constraints for farmers during the post-harvest period and allow them to take advantage of potential price arbitrage opportunities, while reducing post-harvest losses, and thereby increasing farm income. Given the limited available evidence on the effectiveness of WRS, the authors embedded an experimental impact evaluation study in a pilot WRS project in the Senegal rice sector, to shed light on how smallholder farmers might benefit. In a sample of 1079 rice producers, of which 363 were offered access to a WRS, the authors observed a very low take-up (2 percent), which compromised the opportunity to uncover the impacts of WRS. The authors therefore focus on the reasons for non participation and find that large transaction costs, limited availability of marketable surplus, and limited market arbitrage opportunities in the rice sector, have reduced the potential benefits from participation and affected farmers’ decision to use the WRS. The findings suggest that the implementation of effective WRS warrants a careful consideration of costs factors and expected price arbitrage opportunities to ensure farmers will benefit.