KARACHI: Development of commodities physical trade and marketing system is inevitable for improving performance of the agricultural sector.
Deputy Governor of State Bank of Pakistan (SBP) Saeed Ahmad at a meeting on formulation of Working Group on Development of Warehouse Receipt Financing said the Group would serve as a platform for all stakeholders to identify bottlenecks and devise strategies to establish a mechanism for Warehouse Receipt Financing in the country.
He stressed upon formulation of guidelines for introduction of warehouse receipt financing to enable farmers, traders, aggregators, processors and exporters in getting access to formal financing.
It was pointed out Pakistan produces around 30 million tonnes of grains including wheat, rice and maize but the storage capacity provided by the federal and provincial food department was only for around 5 million tonnes. Consequently, Pakistan’s agriculture sector suffers from a compounded problem of a lack of infrastructure and market structure for agriculture produce. The resulting inefficiencies impact all market participants and keep the sector away from becoming competitive.
SBP has initiated the development of storage, marketing and post harvest financing system in collaboration with Karachi Stock Exchange, Pakistan Mercantile Exchange (PMEX), Pakistan Banks Association (PBA), Competitiveness Support Fund (CSF) and Pakistan Farmers Association. SBP has already launched a refinance scheme for construction of silos and warehouses for agriculture produce at subsidised rates to encourage private sector participation.
Saeed Ahmad said the adoption of warehouse receipt system would facilitate development of efficient and accessible rural financial systems. “In addition, banks will find it profitable to finance the construction of new warehouses under such scheme as profitability of the new businesses is more clearly identified under this system. Markets transparency is another crucial element that comes along the proposed scheme. All players will be able to know and act on the National Spot Prices.”
He urged his team to closely work with PMEX, banks and farmers and other players to structure and rollout system of warehouse receipt financing in the country on fast track basis.
Development of storage capacities will save billion of rupees to the national exchequer through curtailment of post harvest losses of more than 10 percent for grains and 30 to 35 percent for fruits and vegetables. It will also pave way for linking commodities markets with international commodities exchanges through trading against Warehouse Receipts.
The working group will have representatives from leading commercial banks, Islamic banks, International Finance Corporation and ACE Control and Expertise Global (Pvt) Ltd.
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