The Government of Pakistan (GoP) has embarked upon a multifarious program to facilitate farmers in the country for achieving food security. Lending to farmers for the purchase of inputs has helped in achieving higher output of various crops. However, the efforts remain eclipsed due to post-harvest losses ranging from 15 to 40 percent for various crops.
To contain post-harvest losses, creation of warehousing and collateral management companies is being facilitated by Securities and Exchange of Commission of Pakistan (SECP). The overall plan is to encourage the farmers to store their produce at these warehouses, get the warehouse receipt, sell their produce as and when prices are favorable or acquire loans by pledging the stock.
SECP has issued draft Collateral Management and Warehousing (Establishment & Operations) Regulations, 2016. SECP also sought powers to conduct the inspection of collateral management companies (CMCs) and proposed to make it mandatory for CMCs to obtain licenses from the commission.
To implement the project in a prudent manner SECP approached USAID. In response to that a delegation headed by Dr. André van der Vyve, eWRS, USAID Financial Market Development Activity visited the Exchange on November 16, 2016 to get the firsthand knowledge about Pakistan market and PMEX operations. The delegation also visited Kunri ‘the capital of red chilli in Asia’.
Subsequently on December 06, 2016, the delegation visited Pakistan to discuss the modalities of the project with all the stakeholders. The details of the proposed model prepared by the USAID was based on the successful execution of pilot project of trading of red chilli undertaken by PMEX in collaboration with the value chain partners who helped in quality certification, warehousing and logistics.
The key objective of introducing warehouse receipt financing of agricultural commodities in Pakistan is aimed at enabling the growers to get fair price of their produce, avail financing facilities and promote efficient payment system. The successful completion of pilot project of red chilli has paved the way for replicating the model for other key commodities i.e. wheat, rice, cotton, maize etc.