By David Ssempijja

Housing Finance Bank has introduced a new loan product targeting warehouse depositors of agriculture commodities.“This loan is intended to help farmers whose produce are deposited in certified warehouses or during the transaction process, for example during the export process,” said Paul Nuwagaba, the bank’s head of business financing.

He was speaking during the launch of the product at the Serena Kampala Hotel last week. The loan facility is under the bank’s agricultural commodity, tax and freight financing component.

The short-term loans are meant for warehouse depositors of maize grain, rice, coffee and other agricultural commodities that will be introduced onto the Uganda Commodity Exchange (UCE) trading floor.

UCE is the government’s regulator of the warehouse receipt system. Farmers are issued with receipts after depositing their produce at a gazetted certified warehouse.

The farmers can then use the receipts, which contain details of the quality, quantity and monetary worth of their commodities, as collateral to access commodity financing.

For the commodity depositors, the bank will offer loans of up to 60% of the value of the produce in the warehouse at prevailing prices.

With the tax and freight component, the client must have goods worth a minimum of 150% of the requested loan amount. Nuwagaba said the current pricing barometer will be based on indicative prices issued from the Uganda Coffee Development Authority for coffee and World Food Programme tender prices for maize and beans.

Participating warehouses should also be licensed by the Uganda Commodity Exchange. At present, there are licensed warehouses in Kasese, Mbarara, Jinja and Masindi.

“Implementation and financing of the warehouse receipt system will compliment the Government’s proposed socio-economic development strategy to improve rural incomes through allowing farmers’ using their produce as collateral,” Syda Bumba, the finance minister, said in a statement read by Aston Kajara, the investment minister.

Christian Baine, the chief executive officer for Coronet Collateral Management Services, assured banks involved in the financing of farmers under the warehouse receipt system that his company would ensure that nothing compromises the integrity of the loan system.

Coronet offers services that are key during the full implementation of WRS. It undertakes pre-loan surveys and due diligence studies, quality assurance, foreign exchange advisory services and seasonality of commodities.

Baine was hopeful that financing farmers before their produce is sold would help them solve problems that force them to sell the produce at undesirable times and prices.