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2SCALE

MODULE7

Warrantageof
agriculturalproducts
FacilitatorsGuide
Exercises
ReferenceSheets

Publication of this manual was supported by the Dutch Ministry of Foreign Affairs.
The manual was developed by technical experts of ICRA, partner within the 2SCALE Project.
The contents do not necessarily reflect the views of the Dutch Ministry of Foreign Affairs.
2SCALE, 2015

MODULE 7

Warrantage of agricultural products

A FEW WORDS ON WARRANTAGE


Access to credit services that are adapted to cluster actors, and specifically to small farmers and their
organisations is often limited. This module addresses this challenge. As guarantees are often a major
issue, a so-called warrantage system has been developed, which enables business actors (often
Producer Organisations) to obtain credit services on the basis of the mobilisation and controlling of a
part of their produce. Such an inventory credit practice has the advantage of being adapted to the
needs of small-scale farmers and has proven to be a potentially relevant income-generating tool.
A FEW WORDS ON BSS, COACHES AND TRAINERS
Initially the 2SCALE project defined BSS as any institution/organization/firm that include consultants,
governmental and non-governmental organisations (NGOs), research departments and enterprises
that support producers, processors and other affiliated enterprises. BSS generally single out an
individual from within the group to oversee the activities of the cluster through coaching; this
individual is called a coach. Sometimes the BSS will also be the coach and thus these two terms (BSS
and Coach) may be used interchangeably. It is worth noting here, as we will see later, that the BSS is
an important actor of the ABC, a group of local actors interacting in a given area around an
agricultural product (commodity) and servicing a segment of the market (through a common or
shared vision). Trainers will be responsible for strengthening the capacities of the BSS/coaches.
Facilitators will be encouraged to take note of any lessons learnt in the capacity strengthening
sessions and to give feedback so that their input can be used for further improvement of the module.
The roles and responsibilities of the BSS in CASE can be grouped into three main domains:
Brokering services and networking; Information and advice, i.e. market analysis, strategies of
competitors;
Training and support in technical and entrepreneurial issues;
Design and set-up of capacity strengthening and action research programmes that include the
facilitation of interactive learning processes to support the formation of ABCs, value chain
development and creativity and innovativeness. This is for instance strengthening of confidence,
collective analysis, collective monitoring of concerted actions, etc.
The BSS require a lot of diverse and complementary competences in these fields. BSS are crucial ABC
actors especially in the first years of the ABC. In most cases, the capacities of the BSS need to be
strengthened so that they can fully play their roles and assume their responsibilities in the ABC.
The 2SCALE project is putting increasing emphasis on embedded coaching competences and thus on
building capacity of business services among the local cluster actors. This means that business
coaches increasingly originate and relate to one of the key business actors inside the cluster. This
means that we are now moving from external to internal BSS and coaches. In practice such
coaches can be staff members or agents from lead firms or be associated to the farmer organisations
of the cluster. This guide is set up for BSS/coaches and trainers and will help to strengthen the
capacities of the BSS throughout the learning process and accompany/support the BSS in their
fieldwork.

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A FEW WORDS ON THE SERIES OF MODULES WITH FACILITATORS GUIDES


We develop modules that address the different competences the BSS/coach should have. Each
module will be a collection/package containing the following:
1) Facilitators guide on how to conduct a training session/workshop
2) Reference sheets or what are commonly referred to as hand-outs
3) Excerpts from educational films and
4) Exercises
The facilitators guides are meant to guide the delivery of training sessions and the organization of
workshops or any other opportunity to strengthen the competences of the BSS/coach. For most of
the guides, the capacity strengthening will be in the form of a learning cycle, which is composed of
three phases:
Review and acquisition of knowledge on the theme, normally through a workshop.
Implementation in the concrete context of providing support to ABC which will normally include
field coaching by the trainer.
Reflection and revision of lessons learned, generally through a workshop with those BSS/coaches
that actually required experience in the field (and possibly adaptation of the guide).
Basically, Facilitators guides deal with the knowledge review and acquisition workshops and
occasionally with aspects of field implementation. In practice, the workshops group several BSS that
are, preferably, accompanied by one or more direct actors of the ABC. Each guide is an entity; all
together the guides can be assembled in a binder comprising general themes (e.g. preparing a
workshop, identifying fears and expectations) and specific themes (e.g. introduction to CASE
approach, business plan development) Each guide specifies the pedagogic objectives, the steps to be
taken to conduct the workshop or training, and the programme set-up with all details and adapted
pedagogic material.
Apart from the binder with Facilitators Guides, there is also one with Reference Sheets
corresponding to the modules. The Reference Sheets to be used for the session are indicated at the
end of each session. These sheets will be provided to the participants at the end of the day. The
exercise(s) and/or video excerpts to be used during the sessions are also cited within the specific
session.
ABBREVIATIONS AND ACRONYMS
2SCALE
ABC
BSS
CASE
CSC
ICRA
IFDC
NGOs
VC

Towards Sustainable Clusters in Agribusiness through Learning in Entrepreneurship


Agribusiness Cluster (sometimes represented simply as cluster)
Business Support Services
Competitive Agricultural Systems and Enterprises
Capacity Strengthening Coordinator
International Centre for development oriented Research in Agriculture
International Fertilizer Development Centre
Non-Governmental Organizations
Value Chain

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

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Warrantage of agricultural products

Foreword
This module1 addresses a challenge faced by both individual small-scale farmers and
Producer Organisations (PO), i.e. lack of access to credit. Warrantage is an inventory credit
system (also called Warehouse receipt system) adapted to the needs of small-scale farmers
and at the same time an income-generating tool.
The following example illustrates the challenge.
The maize producers' cooperative XYZ has already harvested 100 tons of dried maize. The price of
maize is usually lowest at harvest time. The cooperatives members realize that if they wait a few
months before selling their crop, prices will probably be better. They are, however, in immediate need
of cash to meet their urgent needs and to prepare for the next growing season: purchase of inputs,
seeds and labour. Unfortunately, the financial institution (bank) is reluctant to lend them money to
buy fertilizers since the financial situation is uncertain and moreover, a good harvest and thus
repayment of the loan are not guaranteed. What to do?

Lack of access to credit ranks high among the many constraints to the intensification of
agricultural activities of small-scale farmers in Africa. The agricultural credit products that
banks and Decentralized Financial Systems (DFS) offer are often not adapted to small-scale
farmers conditions. The low solvability of loan applicants, combined with the fact that loans
requested are often small, and banks are not represented in remote areas, all increase
transaction costs and reduce the interest of financial institutions to finance agricultural
activities. In addition, banks often require unsuitable forms of guarantees, like personal
contributions, blocked savings up to 30% of the credit, and small-scale farmers have limited
financial resources, which reduce the possibility that banks or other financial institution can
positively respond to their credit/loan requests.
Thus, to be able to finance their input needs early in the season (fertilizers, seeds, etc.),
small-scale producers often have to fall back on the traditional credit systems granted by
local traders that are characterised by high interest rates. Moreover, repayments are often
made in kind, with the product calculated at the lowest price, as is the case immediately
after harvesting. Also, producers sometimes request for loans immediately after the harvest
to be able to store their products and sell them at higher prices in the lean period. It is on
this latter issue that producer organizations can think of an intermediate and suitable
solution: keeping the stock within the community, in a store controlled by a producer
organization or a DFS, so that it may serve as a collateral.

The module has been developed by Lonard Cossi Hinnou, Aurlia Dakpogan, Franois Dossouhoui, Bernard
Dedjelenou, Marie-Jo Dugu, and Toon Defoer.
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Learning Objectives
At the end of this training session, coaches will be able to support Agribusiness Cluster (ABC)
actors in mobilizing and controlling a part of their production that will allow them to access
credit and inputs for the development of their activities. In particular, at the end of this
workshop, participants will be able to control and be informed about:

The origin of the warrantage or warehouse receipt system and its characteristics
The warrantage concept
The reasons underlying a warrantage system
The actors involved in or affected by a warrantage system, their roles and interests
The operational mechanisms of a warrantage system in an agricultural and local context
The advantages and disadvantages/limitations of a warrantage system
The requirements or favourable conditions for the proper functioning of a warrantage
system
The basic rules of an effective warrantage system (dos and donts)

The workshop outline


This learning workshop includes 7 sessions that address the important aspects of warrantage
in the context of the 2SCALE project. After the introduction (Session 1), Session 2 clarifies the
concept of warrantage. The goal is to better explain warrantage and its characteristics so
that all participants have the same understanding of its concept. Session 3 presents the
reasons/motives for setting up a warrantage system, in other words, it answers the main
question of why to have warrantage in agricultural production systems. In Session 4, the
main operations/processes emerging from the definition of the warehouse receipt and the
various phases or steps are identified, so that an operational warrantage mechanism can be
described through and implemented by the subsequent steps. In Session 5, the different
actors involved in warrantage are identified as well as their roles. Session 6 addresses
conditions that are conducive to the development and implementation of an effective
warrantage system. In Session 7 a Terms of Reference (ToR) is developed for on-the-job
coaching. The module ends with a short summary and an evaluation of the workshop.
Session 1: Introduction
Session 2: The warrantage concept and its characteristics
Session 3: Reasons for warrantage / Why warrantage in agricultural production systems
Session 4: Warrantage operations and their timing
Session 5: Warrantage actors or stakeholders and their roles
Session 6: Conditions/management tools for effective warrantage
Session 7: Development of ToR for on-the-job coaching
All sessions together will enable participants to build and implement warrantage systems
with actors from ABCs in the 2SCALE project areas. The coaches will accompany key players
of ABCs and value chains in installing a warrantage system to access production resources
like inputs and credit, but also to control the supply of agricultural products ensuring food
security of households and improving their income.
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Session 1: Introduction
This introductory session is for the participants to get to know each other and to get familiar
with the learning method that is based on interactive communication and constructive
feedback rather than through lecturing. The session also aims to build a team and share the
objectives of the workshop and its set-up. In most cases the session may be kept short as the
coaches and the trainer will know each other already. Depending on the situation, this
session consists of the following aspects:
A welcome to the participants: information on accommodation, the workshop program,

training tools, directions, etc. is given.


A general introduction: participants introduce themselves and present their expectations.
Each person mentions his/her name, affiliation, position within their organisation and/or
Business Support Service (BSS) they are part of, their experience in coaching, and on
issues related to warrantage, collective selling, etc. Expectations and challenges of
participants are identified and summarized. In the evaluation session of the workshop
these will be looked at again.
An explanation of the learning objectives and the themes that will be covered during the
workshop. An overview of the training content as well as the methodology of the
workshop will be presented, emphasizing its iterative character and its active
participatory and collective learning approach.
Informing the participants that the workshop program can be adjusted to the desires and
needs. The programme and eventual changes may be visualized on a flip chart or with
PowerPoint slides. A printed programme is distributed.
Agreeing on basic procedures to be followed during the workshop, i.e. on the do's and
don'ts. Ask participants to list them on a flip chart paper and stick them on the wall for
the duration of the workshop.

Session 2: The warrantage concept and its characteristics


Introduction
This section aims to clarify the warrantage concept starting from its origin, so to harmonize
the perception of all participants on the concept.

Learning objectives
At the end of this session, participants will be able to:
Define the concept of warrantage
Identify the characteristics of warrantage
Familiarize themselves with the various forms of warrantage

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Procedure/tools
The session begins with observing Figure 1:
Amina : Our cooperative has no
land nor house, but we do have
maize..

Akounon : Is it in a
store of which we can
have the key? Perfect!

Fig. 1: The stock of maize makes it possible to get a loan from the bank

Subsequently, the facilitator collects the participants' answers to the following questions:
What is Amina trying to obtain?
What is the credit guarantee under negotiation?
Why is it that Akounon accepts a stock of maize as a credit guarantee? Would he be able

to accept a stock of tomatoes?


Advice for the facilitator
The facilitator collects the cards as they come and displays them on the board, trying to regroup
ideas that are similar. This will enable summarizing the ideas by some common features. The
facilitator concludes by giving his/her point of view and a summary of the warrantage concept. The
facilitator should not force participants to give their ideas. Some participants may hear for the first
time about the warrantage concept. The purpose and expectations of brainstorming should be well
explained.
Pay attention to certain terms such as credit, storage, inputs, market, financial institutions, and mark
them. These terms may help later to identify actors, clarify the objectives of warrantage, and see
how the mechanism works. In any case, at this level, participants must already understand that
warrantage is equivalent to a stock loan system or an inventory credit system.

Thereafter, the facilitator summarizes the discussion, mentioning that:


Warrantage, also called credit storage or inventory credit, is a rural credit system with a

time span of several months for which the stock of a commodity serves as a collateral in
kind for a banker, and thus as a guarantee for the reimbursement of the credit/loan in
case of failure (the warrant).
For a producer organization (PO) and/or its members, warrantage consists of obtaining a
loan that is guaranteed by putting in its harvest (soybean, sorghum, rice, maize, peanuts,
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Warrantage of agricultural products

etc.) as a collateral; the produce may increase in value over time and should not be easily
perishable.
Warrantage enables producers to get access to a credit while keeping control over their
products, and at the same time warrantage increases the credit security for bankers
and/or micro-finance institutions.
Warrantage is a short-term credit system, guaranteed by stocks of farm products that can be
stored in a proper storage facility and that may increase in value over time.
The facilitator then elaborates on the different forms of warrantage. There are basically four
types of storage for stocks of produce that can serve as collateral:
Storage by the banker: the financial institution holds the stock. It owns the storage

warehouse and assumes the role of an approved warehouse keeper.


Storage by collateral management for the duration of the credit period: the collateral

stock is held by a third person, who is a licensed warehouse operator, a professional in


storage who arranges the contracts, a theft and fire insurance, and who is paid for these
services. This operator provides a warrant receipt" or a "certificate of deposit" to the
producers.
Storage at household level: the stock is held for the duration of the credit by the owner of
the produce, who is also the sole beneficiary of the credit.
Storage at community level: the PO, as a legal body, owns the storage warehouse. The PO
assumes and performs all the functions of a licensed warehouse operator. Both parties,
the financial institution and the PO, sign a "stock deposit certificate".
The most common form of storage in rural communities is storage at community level, or, in
countries where there are licensed warehouse operators/managers, by collateral
management.
Short background of warrantage
The warrantage or inventory credit system goes back to the late nineteenth century when European
farmers had to find means of financing without getting rid of their operating resources. Under the
warrantage system, farmers, rather than selling their harvest at once, used it as collateral to obtain
credit from a bank. As financial services often do not have sufficient storage capacity, deposits are
made through certificates: the goods are stored in general stores, and the warehouse managers
provide "warehouse receipts" or "deposit certificates" to guarantee both the claim and the goods
given as collateral.
Warrantage was first introduced in Niger by the FAO Agricultural Inputs Project (1999-2008).

Session 3: Why warrantage?


Introduction
This section aims to clarify the reasons for the instalment of a warrantage system in an
agricultural production system.

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Learning objectives
At the end of this session, participants will be able to:
Comprehend the soundness of the warrantage concept
Weigh the merits and shortcomings of warrantage
Identify in what situations it may be advantageous to opt for storage credit

Procedure/tools
Session 3 starts with a brainstorming exercise on the reasons behind the warrantage system.
The question is:
Why have a warrantage system for agricultural products?
The participants write the underlying reasons of an inventory credit system or warehouse
receipt system on coloured cards: What are the objectives of warrantage in an agricultural
production system?
Advice for the facilitator
Participants should list as many reasons as possible to get a rich list of reasons for warrantage. The
cards are collected and displayed on the board or wall. The facilitator explains to the participants not
to only look at market aspects. Warrantage can also ensure food security in households. In arranging
the cards and synthesizing the outcomes, the facilitator focuses on the definition and objectives of
establishing a warehouse receipt system.
The facilitator starts to link the definition of warrantage as developed by the participants and as
summarized by him/her with the reasons for warrantage. Key concepts that follow from the definition
and objectives of warrantage will allow to apprehend the coherence and new roads to explore in the
next phase of the workshop. The workshop is dynamic and part of a continuous learning approach.
The facilitator avoids having long summaries but leads participants to understand all concepts on the
checklist.

Then the facilitator summarizes the discussion, mentioning that nowadays warrantage
serves to secure farm credits but also aims at increasing revenues from agricultural
production, especially when marketing situations are difficult.
Warrantage is a technique that contributes to food security by developing:
Micro-finance services to farmers: By putting up their stock of food crops at harvesting
time as collateral, the farmers have a source of cash to conduct post-harvest income
generating activities.
A stock of produce that can be made available for producers when needed (e.g. as seed at
time of sowing and/or during the hungry season), either as an input for next growing
season or for home consumption.
A potential increase in value of the produce, as prices generally increase some months
after the harvesting period. After reimbursement of the credit, producers may, if desired,
sell their stocks on the market and profit from higher prices. With the profits, the
producer or PO may invest in inputs and materials/equipment for the next cropping
season (through a combined and creditworthy application).
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A potential for the credit recipients to use the money (credit) to realize income-

generating activities and subsequently repay the credit, at least in part, and keep the
stock to sell in a period of higher prices. This practice also helps to cope with possible
storage losses (risk management).
A strategy against crop sell-off and a cash management strategy for producers to meet
their needs throughout the year.
The facilitator then restates that warrantage is not a panacea for the valorisation of
agricultural products and that, like all other types of micro-credit, warrantage has
advantages and limitations, both for the producers and for the finance institutions. A list of
benefits and limitations is developed through an interactive exchange and presented on a
flipchart in plenary.
Example of a table resulting from interactive exchange
Actors

MFI/DFS

Producers

Benefits
Protection against risks
Reducing/limiting of seasonal price fluctuations
Guarantee in kind through the stock
More secure credit and repayment
Higher volume of credit and development of a healthy
portfolio
Profitability
Price transparency
Food security
Quality and quantity of grain
No longer under the influence of speculative traders
and/or local moneylenders, besides the possibility of
generating additional revenue with higher sales prices
of the stored product
Increased investments in agricultural production and
reduced migration from rural to urban areas.
Better structured and more professional POs: the role
and usefulness of the organization's services (storage,
research and sponsorship credit, research opportunities
and improved income from marketing of agricultural
products, etc.) are well highlighted.
Improving the quality of agricultural products;
introduction of quality standards for proper control of
stored products
Improving the negotiation power of producers: a better
marketing of the products in time

Limitations
Warehouse management
Risk due to extreme
weather conditions
No storage facilities
Remoteness of DFS

Speculation (price risk)


Poor choice of product to
be stored
Poor storage conditions
and techniques
(inadequate drying devices
or conservation of
agricultural products)
Poor stock management
(non-trained storekeeper)
No proper transport of
goods to the warehouse

Although in many cases the choice for a specific product will already have been taken, it is
important to realize that not all agricultural products are suitable for warrantage
speculation. It is vital to make a kind of product classification according to the suitability of
agricultural stock for the warehouse receipt system. The criteria for determining such a
classification are, among others:

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The potential of price increase of the commodity in the period after harvesting: so

difference in prices at harvesting (usually abundance of product) and in a lean period


(shortage of product) when the price is assumed to be much higher.
Product shelf life and storability; it will be clear that a product with a short shelf is not to
be considered for warrantage.
The quantity of quality-product subject to the warehouse receipt: a) are there many
farmers that produce a good quality standard of the commodity; b) are the quantities
well beyond the family needs; c) is the commodity generally sold on the (local) market?

Additional reading
Reference sheet 1: Identification sheet for warrantable products
Reference sheet 2: Checklist for producers of warrantable agricultural products

Session 4: Warrantage operations and timing


Introduction
Based on the previous two sections, the main operations of warrantage will be identified and
presented in a diagram. This will evolve into a decision on the main stages of the set-up and
implementation of a warrantage system.

Learning objectives
At the end of this session, participants will be able to:
Identify the list of main operations of warrantage
Map the operations and explain the warrantage or warehouse receipt system
Agree upon and describe the main stages of the set-up and implementation of a

warrantage system

Procedure/tools
This session starts with an exchange in the form of a plenary. The facilitator asks participants
to identify postharvest operations (of e.g. maize) of a group of producers that is interested in
a storage loan in which the community is in charge of the stock. The various responses are
written (or symbolized) on cards and displayed on a board or wall. The facilitator then
summarizes the answers to get a short list that has the following operations:

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Harvesting
Collection
Bundling or regrouping the harvest
Storage (collective)
Obtaining the credit
Using the credit/expenditure (purchase of inputs)
Release of the stock and selling
Refunding of the credit
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The session continues with a group exercise (Exercise 1). The facilitator divides the
participants into two or more sub-groups based on the participants experiences with
warrantage. Participants may also be divided into same-gender groups. This will make it
possible to see differences in results between these subgroups and the possible factors
behind these differences (e.g. the role within the family and/or the usual activities). Women
and men may have a different perception of constraints at the different stages and may
propose different solutions as well. The perception may influence the functioning of the
warrantage mechanism.
In Exercise 1, the participants develop a diagram that visualizes the warrantage system. The
group results are presented in plenary and shared. The following diagram may be used as a
synthesis, specifying the product, money and input flows.
Example of warrantage system in which the community controls the stock system

The warrantage model includes usually a two-pronged agreement (between the


banker/financier or micro-finance institution (MFI) and the borrowing party, that is generally
also the warehouse-store keeper). In case the borrowing party does not have its own
store/warehouse, a third party, a warehouse keeper, is added. The borrowing party is
usually a group of farmers though it may be a trader, a miller, or a big operator. In the
context of developing countries, where producers and stocks are modest, the stock is usually
placed in a collective store that is managed and controlled by the community itself (through
a warrantage committee) a two-pronged agreement. The store or warehouse has a double
lock with one key held by the producer organization (secretary of the warrantage
committee), the borrowing party, and the other one held by the banker/MFI. This option
has the advantage that it is close by and that there is no need for spending extra money on
storage costs and at the same time stock storage "at home" provides more security for the
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bank/MFI on the loan that is given. In such a system, however, the bank/MFI will generally
ask for a regular inspection of the stock by a supervisory agent.
Based on the synthesis model, the groups continue with Exercise 2 to identify the phases
and steps in setting up and implementing the warrantage system and to describe each step
briefly but clearly. After identifying milestones or indicators for each phase, the groups
gather two by two to agree on the identified steps. The common results of the pairs of
groups are then presented and shared again. The final result (end of part 2 of Exercise 2) is
presented in a plenary session followed by a short discussion and some amendments, if
necessary. The following phases and steps should be included:
Phases/Steps
Phase 1: Preparation
Steps:
Analysis of the productive potential of all actors (distinguishing men and
women)
Information and creating awareness regarding warrantage
Decision making (determining the price and appointment of a warrantage
committee)
Planning of the warrantage (timetable)
Negotiations with the banker (decentralized finance system, DFS)
Phase 2: Setting up the system
Steps
Collection of the produce
Preparation of stores/warehouses
Stockpiling and registration of depositors, compiling of bags
Stock management and stock inventory
Conclusion of the agreement between the PO and the banker/financier
Credit issuance and distribution of funds
Phase 3: Follow-up
Steps
Checking stocks and maintaining stores
Follow market information (to decide when to sell and end the loan period)
Repayment of the loan to the banker
Market information and decision to market
Stock release
Phase 4 : Evaluation of the process
Steps
Evaluation of the warrantage system and results obtained
Restitution/refund to members of the producer organisation
Planning for taking a new loan

Timetable

The warrantage mechanism diagram as decided upon in Exercise 1 can now be amended, if
necessary, and a timetable schedule should be included. Like any other operation,
warrantage has to be planned in time and tuned according to the growing season. This
allows better empowerment of the stakeholder and taking timely provisions at the level of
both producers and the financial institution.
Knowing the crop production calendar on the one hand, and the operations, demands and
cropping time to implement them on the other hand, the credit warrantage timetable will be
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based upon a growing season.


The groups then continue with part 3 of Exercise 2 in which they briefly describe each step.
The final results are presented in plenary, followed by a plenary discussion.

Session 5: Warrantage stakeholders and their roles


Introduction
Warrantage involves several actors. Depending on the context, a stakeholder may occupy
several positions or work with subcontractors that need to be properly identified and
defined.

Learning objectives
At the end of this session, participants will be able to:
Identify key players involved in the implementation of warrantage
Describe the roles of each actor

Procedure/tools
This session begins with reading a short, hypothetical story that presents a realistic
warrantage implementation experience in a country in West Africa. Each participant gets a
copy for individual reading. The facilitator may also read the story aloud, and participants
take note.
Short history of the implementation of a warrantage system
Yacouba and his colleague maize producers of the PO of Saradougou Village have been encountering
difficulties selling their maize for many years now. At harvesting, maize prices are so low that they can
barely cover the production costs. They are forced to sell, however, to repay their debts and to have
sufficient money for their daily live. In addition, the inputs for the next crops also cost a lot of money.
Yacouba heard of a cereal storage system that allows farmers to obtain a credit and in which the grain
could be sold at a later stage, when market prices are higher. He tried to find out more about this
system with the extension agency. Binta, the extension worker, and Yusuf, from the NGO For a better
life, then organised a training on the warrantage system for the farmers of the village. As Binta and
Yusuf said, it is important to have a good number of member producers to have sufficient quantity of
produce as this is likely to lead to better terms with the micro-credit agency of the municipality (the
decentralized financial system, DFS). So, the representatives of the PO identified a location for storage
and organised a strong awareness campaign among colleagues maize producers in the village.
Despite their efforts, however, only 100 farmers were willing to participate and the negotiation with
the DFS did not result in a sufficiently attractive interest rate. So Yacouba contacted Lionel, president
of the union of producer associations, of which the Saradougou PO is a member. Lionel found the idea
of setting up a warrantage system very interesting and he managed to convince some of the other
POs that are part of the union to also join the warrantage system. A number of training sessions were
organised and financed and two weeks later, 7 POs, representing over 4,000 maize producers, were
interested in joining.

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(Short history contd)


Lionel then went to see the director of the DFS and, thanks to his negotiating skills, obtained an
interest rate much lower than the one discussed earlier on. With the agreement of the presidents of
all 7 POs, he signed the credit agreement with the DFS. Each PO set up a warehouse receipt
committee with representatives of the PO, the DFS and the store manager (who in these cases is the
treasurer of the PO). The warrantage committees of the 7 POs began to work and received the bags of
maize from the producers to store. The amount of produce and the sale price (just under the market
price) were agreed upon in advance. The warrantage committees were responsible for storing and
management of the stock, and they stopped receiving goods after the set deadline. Each producer
received a certificate of deposit. Once this was completed, the committee provided the information to
the Union. Lionel, on behalf of the Union, finalised the agreement with the DFS. The store was
inspected and the maize quality was checked in particular. The store was then padlocked by two
parties (DFS and the PO Union) and the credit was granted. The funds were redistributed to the 7 POs
in accordance with the quantities stored and the warrantage committee of each PO was responsible
for the redistribution of credits to individual producers.
The committees work did not stop there as they were responsible for monitoring the "health" of the
stock as well. At a certain moment, the DFS came to check whether stock quality and safety were ok.
Considering the living conditions of its members, the PO also keeps an eye on the proper use of the
loan. The members are encouraged to engage in income-generating activities (IGAs). For this purpose,
Binta and Youssouf, under the guidance of the Union, organized a training on options and models of
IGAs and on finding outlets for the stored maize. A young trainee of the extension service monitored
the market weekly. She regularly informed the warrantage committee, that, meanwhile, started
administering the repayment of loans. This has not always been easy but, with the support of Yusuf
and Binta and an agent of the DFS, all producers in the end managed to refund the credit within eight
months from the start of the grant. This was highly praised by the DFS, but also by Lionel who
confessed that this does not always happen. The Union was responsible for formalizing the repayment
of the credit with the DFS. A very interesting market was found and all maize was sold at a price that
was 70% higher than the sales price at the time of storage. Obviously, all stakeholders were very
satisfied with this first experience of warrantage and in the general assembly of the PO the positive
balance was appreciated by all present.

The last part of the session is primarily in the form of a plenary brainstorming. A list of actors
is identified followed by a description of their respective roles in the set-up, implementation
and functioning of the warrantage system.

14

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

MODULE 7

Warrantage of agricultural products

Note on the warrantage committee


Three main actors are involved in the implementation of warrantage: the PO, the Financial Institution
(FI), and the store manager.
The PO undertakes the checking of the status of the stores/warehouses (healthy and safe),
centralizes group stocks and submits a funding request to the FI. It takes care of:
o Signing the stock deposit agreement and the credit contract with the FI
o Stock management in stores by rights of custody of a key to a padlock against theft and other
forms of losses
o Finding outlets for selling the stored produce with the support of other partners
o Repayment of warrant credit loans to the FI giving out the loan
The FI studies and finances business plans submitted by the POs following the formation of crop
stocks as collateral. The FI carries out the inventory controls in stores in accordance with the POs and
the store manager. The FI is solely responsible for the granted credits and it must therefore proceed to
recover the money.
The store manager is responsible for packaging and monitoring of the stock. He/she also supports
the PO in sensitizing members. Note that the store manager is often a member (secretary or treasurer
of the PO), or an agent of a decentralized department of agriculture (this option has the advantage of
having a professional for safeguarding and monitoring the stock).
All players are represented in a warrantage committee in each locality of intervention.

Summary of the list of actors and their roles


To keep in mind
ACTORS
Producers (M/F), members
of the PO

RESPONSABILITIES
Participate in setting the rules and updating the warrantage
Participate in decisions on the use of the credit obtained
Respect the rules set by the PO and DFS in the warrantage practice

The PO and the warrantage

committee

PO Union or Federation

Sensitize producers to join the warrantage system


Stock storage and inventory management
Identify a DFS partner
Negotiate the loan conditions for its members
Decide on the use of the credit, once obtained
Follow delinquent loans and take collective responsibility in case of nonsolvability of a member
Redistribute and repay loan
Keep track of inventory in stores by custody of a key to a pad lock against loss
by theft and other losses;
Find outlets for selling the stored produce, with the support of other partners
Assist POs to operate as a legal body
Identify a DFS partner
Negotiate loan conditions for its members
Have the inventory pledge agreement and the credit agreement with the MFI
signed;
Inform and strengthen the capacity of their members on warrantage
Arrange the redistribution and credit repayment (intermediate between DFS
and PO)
Find outlets for selling the stored produce, with the support of other
partners

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

15

Warrantage of agricultural products

(Table Contd)
ACTORS
Decentralised Financial
System (DFS)

Technical services (state),


NGO, projects, research

MODULE 7

RESPONSABILITIES
Guarantee security of the deposit
Grant the credit
Apply good warrantage practices
Sell the produce in case of non-repayment
Support MFIs and POs in training on the principles, rules and warrantage
technique
Support POs in training members in community life, administration and
accounting
Improve the availability of adequate storage facilities at PO level and the
availability of financial resources at DFS level
Facilitate the relationship between PO and DFS/banks
Capitalize on the experiences

At the end of session 5, it is important to review the key elements of the process and of
stakeholder roles.
Creating awareness
Awareness creating sessions are organized in each locality before the harvest period, under
the responsibility of the warrantage committee. Awareness creating elements are:

Prerequisites of the product before storing (including quality standards of the produce)
The planning of produce collecting days, for each store
The IGA credit characteristics during the storage period
The credit refund mechanism

Collecting and storing of produce


The collection of produce takes place at each store following the planning as made known in
the preparation phase. Collection can take several days depending on the quantities to be
stored.
Each participating producer will bring his produce in bags or in bulk to the entrance of the

16

store.
A check of the quality of the produce is done by the store manager at store level (by
spreading it on a tarpaulin) to determine the level of impurity, humidity, the presence of
foreign bodies, etc.
After positive assessment of the quality of the stock, the warrantage committee proceeds
with the packaging and the storage.
Each producer having stock in the store is given a deposit certificate as a warrant
document.
Producers whose stocks is rejected at the collection days are no longer eligible for a
credit.
After closing each store, one key is kept by the manager of the FI and the other by the
president of the PO.

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

MODULE 7

Warrantage of agricultural products

Obtaining credit
Any producer having produce in the store will get a credit of 70 to 80% of the value of the
stock at the moment of deposition.
In case of a credit for an income-generating activity, only the IGA activity serves the credit
repayment. The profitability of the IGAs will be evaluated by the FI before granting the
credit.
Controlling of stock
The storage period can range from three to six months. During the storage period:
The stored product be checked on a monthly base by the store manager together with
representatives of the PO and the FI. In case the checks reveal damage of some bags,
these bags will be destroyed and sale of this stock will need to be organized in the next
days in order not to lose all later.
Price fluctuations of stored goods are observed to decide on the right time to sell the
stock. The PO also ensures that the IGA credits received are appropriately used for the
implementation of IGAs.
Refunding and destocking
At the end of the credit, the PO ensures repayment of the loan and the interest due. When
prices are favourable, the PO organizes the group sale of the stock. If the income of the IGA
is not enough to pay off the loan, the PO reimburses the loan with the revenue from the sale
of the stock.

Session 6: Management tools of warrantage


Introduction
Managing the warrantage process requires mastery of a number of tools that have been
developed by specialists in rural financing. This session focuses on these tools.

Learning objectives
At the end of this session, participants will be able to:

Apprehend the different mechanisms of warrantage management tools.


Understand the purpose of these tools
Master the use of these tools

Procedure/tools
This session starts with a brainstorming session on the importance of tools for managing the
warrantage mechanism. The facilitator collects the responses and summarizes the main
objectives of the use of the tools.

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

17

Warrantage of agricultural products

MODULE 7

Advice for the facilitator


The use of tools for the management of warrantage is:

To ensure discipline in the PO regarding the warrantage management mechanism


To ensure transparency in the collection of products
To ensure compliance with the storage conditions
To formalize relations between financial institutions and producer organisations

The session continues with the presentation of each tool used. The next table gives a
detailed overview of most tools involved in the implementation of warrantage (see also the
list of references).
Tool
Model of rules and procedures
Identification form for types of
warrantable products (see Session 3)
Classification checklist of agricultural
warrantable products to be filled by
producers (see Session 3)
Deposit certificate for warranted goods
Stock register
Method of storage of products in the
store
Reports of joint FI/PO stock checking
visits
Rating scale/scoring grid for financing
business plans
Pledge agreement for produce
Credit contract

Aim
Ensure discipline within the PO as to
the management mechanism
Promote greater adherence of farmers
through diversification of products to
be stored
Choose the best warrantable products
per location

Presentation
Reference model

Provide the FI with a deposit


certificate per producer
Ensure transparency in the collection
of products
Ensure compliance with the storage
conditions

Deposit certificate

Facilitate the exploitation of business


plans
Formalise the relations between FI
and PO

Scoring grid

Product identification
form
Product classification
checklist

Stock register of
warranted goods
Storage method
manual
Table for stock check

Pledge agreement form


Contract for warranted
products

Subsequently the facilitator introduces Exercise 4, which allows participants to become more
familiar with the use of these tools. The work is done in small groups after which the
presentations are in plenary, followed by a discussion.

Additional reading
Reference sheet 3 : Reference model of rules and regulations
Reference sheet 4 : Model of deposit certificate (warrant)
Reference sheet 5 : Stock register
Reference sheet 6 : How to stock bags in the store
Reference sheet 7 : Table for stock check
Reference sheet 8 : Scoring grid
Reference sheet 9 : Stock deposit agreement
Reference sheet 10 : Warrantage contract
18

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

MODULE 7

Warrantage of agricultural products

Session 7: Requirements for a proper warrantage


Introduction
Implementing a functional and successful warrantage system requires good practices. This
session is to organize interviews with one or more representatives of POs (or warrantage
committees) who have experienced setting up a warrantage system.

Learning objectives
At the end of this session, participants will be able to:

Identify and analyse factors that may positively influence the success of warrantage.
Identify and analyse the factors that may negatively influence the success of warrantage.

Procedure/tools
The facilitator explains that in this session participants will hold interviews with one or more
representatives of POs that have experienced warrantage. For the interviews, participants
have to prepare a checklist. This can be done in groups (see Exercise 3) or in a plenary
brainstorming session, in case there is not enough time.
Advice for the facilitator
The facilitator identifies some POs in the area that have good and some less good experiences in
implementing a warrantage system. He/she contacts the PO executives to get them interested to
participate in a training session for coaches. Ideally, the facilitator manages to identify a female and a
male producer, and possibly also the head of the FI that was involved in the warrantage with the POs,
and member of the warrantage committee. Date, time and location of the appointments are
confirmed and determine the day of the training session.

The results of the group work are presented in plenary followed by a discussion/summary on
good warrantage terms and principles. After this exchange, participants get time to read the
background material, and then there is time for questions on the subject.
Requirements to remember:
Existence of a dynamic and formal farmer organization: POs have a key role in the establishment
and management of sufficient and good quality stocks, the credit negotiations with DFS as well as
the distribution of credits among its members, credit recovery and repayment, eventual marketing
of stocks, and the decision to use credit in the development of income-generating activities.
Commitment of the farmers to keep the procude in the store up to the end of the operation
Availability of a suitable storage facility (healthy, safe, secure): Needed are warehouses that meet
the quality standards and that can be managed professionally, either privately or (desirably) by
committees in which funding institutions take part together with the POs or individual producers.
Availability of a stock of warrantable products that are likely to increase in value over time: Make
a wise choice of products to be warranted. Most interesting are products that are easy to store,
non-perishable, and that increase in price with time. Such products are also most likely to reassure
most FIs. If one of the three criteria is missing, certain precautions must be taken.
2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

19

Warrantage of agricultural products

MODULE 7

Requirements to remember (Contd):


A financial institution with a credit capacity that is able to meet the demand.
The credit cost should be less than the potential gain induced by the price difference on the
product: For the credit to be profitable, this condition is also essential and decisive for the choice
of warranted products (this may be one of the selection criteria for the list of warrantable
products).
Reliability of the storage facility: If the store manager or store operator is trusted, MFIs can accept
the receipt as a strong guarantee. Reliability of the storage facility also provides security to the
producer.
Economies of scale: Costs for administration and monitoring of warrantage decreases with
increasing scale. The more storage facilities available and the higher the volumes stored, the lower
the cost of the monitoring system.
Appropriate method for determining storage costs: In general, the cost that a farmer is supposed
to contribute - that is to say, the interest on the loan plus storage costs - averages around 25% of
the estimated total profits in the early harvests.
Fixed dates en length of warrantage period: Tuning the length and dates of the credit period
according to the period of highest expected prices of the agricultural products offered as collateral.
In practice, a credit period should not exceed six months.
Continuous training and information: Warrantage cannot function effectively and have a
satisfactory penetration rate without coaching measures. Advocacy work must be done at two
levels: 1. Strengthening the technical skills of intermediate structures responsible for the
distribution of products (MFIs, inventory managers, ..) and 2. Informing farmers on the overall
functioning of the system.
Tangibility of the guarantee: A deposit certificate of the authorized store manager, a double-lock
system, a signed stock pledge agreement, trust by the FI through holding the keys to the store and
a collateral stock agreement and the collective guarantee of the PO as legal entity.
Security of the source(s) for credit repayment: Guarantee of repayment of the credit, in addition
to having the stock as collateral, is often doubled by the obligation of the FI to PO that the credit is
also meant to be invested in income-generating activities. Repayment is normally first done
through IGAs and only in case of difficulties through the sale of the stocks.
Adequacy of the credit amount/guaranteed value/risks: Well defined risks, with, in the absence of
an approved warehouse keeper, other security measures like a double-lock system, a signed
guarantee, a credit that is lower (80%) than the value of the stock, short-term credit, and
repayment through IGAs.

Additional reading
Reference sheet 11: The principles of implementing warrantage

Session 8: Developing Terms of Reference for the coaching session


Introduction
This module is part of a capacity strengthening programme in the form of a series of learning
cycles that each consist of three phases:

20

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

MODULE 7

Warrantage of agricultural products

A knowledge acquisition or skills-building workshop for coaches


Coaching in the field by coaches for the actors of agribusiness clusters (ABCs), and
A session to review and reflect and exchange experience (the latter takes place at the

next knowledge acquisition workshop).

Learning objectives
At the end of the workshop, participants will be able to:
List the activities they will implement with the ABCs within this coaching programme
Agree on the dates for field coaching

Procedure/tools
The facilitator introduces the session with a tour de table to investigate the knowledge and
experiences on warrantage within the ABCs that are supported by the coaches.
For coaches who support an ABC that has already implemented a warrantage system, the
ToR will focus primarily on the analysis of the experiences. The checklists developed in
Session 6 form the basis for this analysis. Coaching will then focus on the origins of problems
regarding warrantage and on solutions to be found to do a better job for the next campaign.
The coaches get together and propose a coaching program, including objectives and
procedures and tools.
For coaches working with ABCs that have no experience with warrantage yet, it is important
to go over the key elements of Sessions 4, 5 and 6. The coaches get together and make a
short first review of key Sessions 4, 5 and 6 in column 2 of the next table. In column 3 they
specify the elements of the inventory credit system that they would be interested to develop
with the ABC and why these are relevant. In the last column they give an indication of how
to put this into practice (tools).
Session

Aspects known /
warrantage
experience

Relevance for the


ABC

Why important?

How to deal with this?


(teaching tool)

3
4
5

The two groups present the work in plenary, followed by a discussion.


Participants capitalize some lessons learned and try to draft a provisional inventory credit
system, based on information from their ABC, their environment and based on their own
experiences.

2SCALE Learning Module 7 Warrantage of agricultural products Facilit. guide

21

2SCALE
MODULE7

Warrantageof
agriculturalproducts
FacilitatorsGuide
Exercises
ReferenceSheets

Publication of this manual was supported by the Dutch Ministry of Foreign Affairs.
The manual was developed by technical experts of ICRA, partner within the 2SCALE Project.
The contents do not necessarily reflect the views of the Dutch Ministry of Foreign Affairs.
2SCALE, 2015

MODULE 7

Warrantage of agricultural products

Instruction on group work and exercises


Before starting each exercise and the group work, please verify whether all group members
have well understood the exercise or the assignment on hand.
To the facilitator:
Make sure participants are distributed into groups of interest, based on gender, or at
random, whatever is needed.
Make sure each group receives adequate tools and materials such as flip sheets, markers,
etc.
Assign an appropriate place/location to each group and sufficient chairs and tables so
that they can work comfortably.
Make sure the participants have good understanding of the task at hand before they split
into their groups so that they do not spend unnecessary time in trying to understand the
assignment.
To the participants:
Discuss and exchange within the group about your individual understanding of the expected
outputs of the exercise and make sure to come to a common understanding on:
The objective of the exercise (what is expected and why?)
How to proceed to answer the question as a group
How to visualise your findings (using poster paper or pin board and coloured cards or
the computer)
Who to appoint to lead/moderate the discussion
How and who to present results during the plenary session
Who will be in charge of the final electronic write up?

2SCALE Learning Module 7 Warrantage of agricultural products Exercises

Warrantage of agricultural products

MODULE 7

Exercise 1: Developing a type of warrantage or inventory credit


system for storage of products at community level
Participants are divided into two or four groups based on their experiences with warrantage
systems and by gender.
Using the understanding of the concept of warrantage and the underlying principles of the
system on the one hand, and the specified operations/transactions that the warrantage
system comprises on the other, each group works out a clear diagram that shows the
warrantage system in an operational way. The following aspects should be included in the
schedule:

Harvesting
Collection
Aggregation of products
(Collective) storage
Obtaining the credit/loan
Using the loan/expenditure (purchase inputs)
Destocking and product sales
Repayment of the loan

The diagram should be made on a flipchart, using symbols or images where possible.

2SCALE Learning Module 7 Warrantage of agricultural products Exercises

MODULE 7

Warrantage of agricultural products

Exercise 2: Identification of the steps in implementing the


warrantage or inventory credit system
The same groups that worked on Exercise 1 will work on Exercise 2.
Part 1
Each group starts listing the steps within each phase of the process, i.e.:
Phase 1: Preparing the operation
Phase 2: Implementing the operation
Phase 3: Monitoring the operation
Phase 4: Evaluating the operation
Part 2
After identifying the steps of each phase, the groups join in pairs. Each pair presents the
results and then discusses to find a compromise and achieve a common result. The common
results of the pairs are again presented, exchanged and shared. The end result is presented
in a plenary, followed by a short discussion and by an adjustment of the steps, if necessary
(see guidelines with the steps to be identified).

Group 1

Group 2

Group 3

Regrouping 1+2

Group 4

Regrouping 3+4

Regrouping 1+2+3+4

Part 3
Subsequently, each of the 4 groups will make a short description (bullet-wise) of the steps of
one of the 4 phases. This can be done in a table with two columns. Put the steps in the first
column and use the second column to describe the steps. For example:
Step/Phase
E.g.
4. Negotiations with decentralized financial system
(DFS)

Description
Identification of all DFS that exist in the area or
might be there
Determining criteria for choosing a DFS
Choosing the DFS to work with

2SCALE Learning Module 7 Warrantage of agricultural products Exercises

Warrantage of agricultural products

MODULE 7

Exercise 3: Identifying warrantage success factors


Participants are divided into two or four subgroups, preferably different groups from the
ones that worked on exercises 1 and 2.
Drawing on the knowledge acquired until now on the establishment and the operation of a
warrantage or inventory credit system, the groups develop a checklist for an
interview/discussion with one or more Producer Organisation (PO) leaders that have
experience with warrantage.
One or two groups work on a checklist with identifying elements and prerequisites for the
preparation of an inventory credit system, whereas the other one or two groups work on the
implementation and monitoring terms of the operation.
The groups working on prerequisites and the preparation of the inventory credit system and
preparation of warrantage, may take the following aspects into account:
Structure and functioning of the PO
The products under warrantage (product availability, production capacity, perishability,

storage facilities, the probability of price fluctuations, etc.)


The storage facility (availability, characteristics, rental conditions, etc.)
The existence of micro-finance institutions (MFIs/DFS) (diversity of choice, credit costs)
Training - building skills in warrantage
Conducting an awareness campaign with members of the PO
Negotiation and contract formalisation with SFD
Implementation of a warrantage committee

The groups working on the implementation and the monitoring may take the following
aspects into account:

Collection of the products


Quantity and quality control
Storage, handling and packaging agent - approved storekeeper, warrantage committee
Store management, inventory control, certificate of deposit
Start and end of the storage
Locking system of the store: in principle 2 padlocks; agreement between PO and DFS
Stock taking and maintenance of the store
The amount of the credit vs. the stock value: risk coverage
Distribution of credits
Source of repayment: Agreement on income-generating activity (IGA), monitoring the
implementation
Training, capacity building in warrantage
Monitoring of markets
Monitoring credit and repayments
Reimbursement and destocking
Product sales
Balance sheets
2SCALE Learning Module 7 Warrantage of agricultural products Exercises

MODULE 7

Warrantage of agricultural products

Exercise 4: Identifying warrantage success factors


Participants are divided into two subgroups.
Sketch of the situation
The village group Fminin Delwend has 15 members. As part of the warrantage system, the
group stored 15 bags of millet of 100 kg each, 46 bags of sorghum of 100 kg each and 7 bags
of maize of 100 kg each. The groups chairwoman stored 5 bags of 100 kg of millet and 3
bags of sorghum of 100 kg each.
One month after closing the store, stocktaking was executed by the PO and the financial
institution (FI). They found:

15 bags of 100 kg of millet in good condition


5 bags of maize in good condition
2 bags of maize belonging to the storekeeper
45 bags of sorghum in good condition
1 bag of sorghum completely damaged by water caused by a leak in the roof; cannot be
sold.

With this information, complete both the deposit certificate of the chairwoman of the village
group and the inventory control sheet.

2SCALE Learning Module 7 Warrantage of agricultural products Exercises

2SCALE
MODULE7

Warrantageof
agriculturalproducts
FacilitatorsGuide
Exercises
ReferenceSheets

Publication of this manual was supported by the Dutch Ministry of Foreign Affairs.
The manual was developed by technical experts of ICRA, partner within the 2SCALE Project.
The contents do not necessarily reflect the views of the Dutch Ministry of Foreign Affairs.
2SCALE, 2015

MODULE 7

Warrantage of agricultural products

Referencesheet1:Identificationsheetforwarrantableproducts

Most
important
products
Maize

Suitabilityfor Keepingrate
storing

Sorghum

Cowpeas

Sesame

Chillipepper

Palmoil

Soya

Cashew

Saleable
quantity

Likelihoodof
increasedselling
prices

Periodofexpectedprice
increase(numberof
monthsafterharvesting)

2SCALE Learning Module 7 Warrantage of agricultural products Reference sheets

MODULE 6

Warrantage of agricultural products

Referencesheet2:Checklistforproducersofwarrantable
agriculturalproducts

Expectedprice
difference

Keepingquality

Production
(quantity)

Rating

Whitemaize
Yellowmaize
Paddy
Cowpeas
Soya
Cashew
Sesame
Sorghum
Redchilli
Palmoil
Groundnuts(intheshell)

Legend
1:Poor
2:Fair
3:Good
4:Verygood

22SCALE Learning Module 7 Warrantage of agricultural products Reference sheets

MODULE 7

Warrantage of agricultural products

Referencesheet3:Internalproceduremodelforthemanagement
ofawarrantagesystembyproducerorganisations

ARTICLE1:INTRODUCTION
Thisproceduredefinestheorganizational,managementandevaluationtermsofoperation
ofawarrantagesystemforaproducerorganisation(PO).

ARTICLE2:DEFINITION,STEPSANDSTANDARDS
Warrantageinthe"noncottoninputproject"consistsofcollateralizingapartoftheharvest
toobtainaninputcreditand/oraloanfor"IncomeGeneratingActivities"(IGAs).Itisatype
ofcreditthatcomprisesseveralsteps,including,inparticular,programming,needs
assessment,stockbuilding,creditgranting,inventorymanagement,repaymentofloans,
salesofstocks,andevaluationoftheactivities.Warrantagetransactionsarecarriedout
accordingtothestandardslaiddownintheseinternalregulationsandintheconditionsof
themicrofinanceinstitutions(MFIs).

ARTICLE3:OBJECTIVESANDTARGETGROUPSOFTHEWARRANTAGE
Throughthewarrantagesystemtheproducerorganisationaims:(i)tostrengthenthe
servicesitprovidestoitsmemberstomeettheirneedsandthustoincreaseitsmemberships
base;(ii)tocontributetotheconsolidationandprofessionalizationofthemembergroups;
(iii)tomobilizesignificantownresources;(iv)tofightpovertythroughimprovedaccessto
creditsforitsmembers,developmentofeconomicactivitiesandimprovementoftheir
incomes;(v)tosecuretheproductionofitsmembers;(vi)toincreasetheproductionand
improvefoodsecurityinitsareaofactivities.
Thebeneficiariesofthewarrantagesystemarethemembersoftheproducerorganisations
thatareinturnmembersofthevillagersPOs.Thecreditreportsareputonthenameofthe
villagersPOs.

ARTICLE4:PRODUCTSTHATCANBEUSEDASCOLLATERALTOOBTAINCREDIT
TheproductsselectedbytheGeneralAssemblyoftheproducerorganisationtoserveas
collateralforthecreditare:

..
TheGeneralAssemblycanadjustthislistofproductsannuallyduringthegrowingseason,as
proposedbytheclusteradvisororpartnershipfacilitatoranddependingontheactual
performanceofthecropsinthefield.
Productsofwarrantagecreditsforindividualgroupmemberscanalsobeincomegenerating
activities,includingthepurchaseofagriculturalinputs,etc.

ARTICLE5:STOCKPILINGANDINVENTORYMANAGEMENT
Theproductsmustbeofgoodquality,andshouldbeprocessedandpackagedwellto
eliminatelossesduringstorage.Startandenddatesofstockpilingarefixedeachyearbythe
GeneralAssemblynotlaterthan..............................,dependingonthedurationofthe
campaign.Theproductsmustbestoredinanappropriatestoreandasecuritysystemmust

2SCALE Learning Module 7 Warrantage of agricultural products Reference sheets

Warrantage of agricultural products

MODULE 6

beinplace.Thecreditonincomegeneratingactivitiesisgrantedforanamountof80%of
thevalueofthestockheld.

ARTICLE6:COMMITMENTSOFPRODUCERORGANISATIONSFORAWARRANTAGESYSTEM.
Forthesmoothrunningofwarrantageoperations,theproducerorganisationiscommitted
toprovideseveralservicestoitsmembers.Theseinclude:

Sharinginformationandcreationofawarenessamongitsmembersonthewarrantage

system,itsbenefits,itsprinciples,itsrisks,etc.
Conveningpreparatorymeetingswithmembersfortheplanningandimplementationof
operations(settingtheperiodthatstockpilingneedstobedone,theproductstobe
stored,storagefees,etc.)
Negotiatingwithmicrofinanceinstitutionsonfinancingtheplannedactivities;
Acquiringsuitablestoragewarehouses
Receivingproducts,priorcheckingofqualityandquantityofproducts,buildingand
trackingthestatusofstockstogetherwiththepartneringmicrofinanceinstitutionand
thegovernmentadvisoryservice
Identifyingindividualandcollectiveinputneeds,developingthecorrespondingbusiness
plansandundertakeactivitiestosearchfundingfrommicrofinanceinstitutionsandbanks
Distributingthecreditsgrantedtothefinalbeneficiariesinaccordancewiththeamounts
andallocationsprovidedbytheMFIpartner.Inthecaseofinputcredit,thisisdone
throughinputdistribution
Monitoringtheuseofgrantedloans,toenableproperrepaymentbymembersand
ensurecompleterefundingtotheMFI
Followingpricedevelopmentsinthemarketforproductsunderwarrantandregularly
informingthemembersofthePO
Conductinganannual,participatoryreviewofthewarrantagesystem,proposingstepsto
improvethefunctioningofthewarehousereceipttransactions
Seekingthesupportofahandlingagenttocertifythequalityoftheproductduringthe
stockpiling

Toprovidetheseservices,andwhenneededthePOcanappointapersonwhoisspecifically
inchargeofthemanagementofthewarrantageprocess.

ARTICLE7:COMMITMENTSOFTHEWARRANTAGEBENEFICIARIES
Thebeneficiariesofwarrantageshallundergothefollowingobligations:
Respecttheclausesofregulationsincludingthetimeandotherstandardssetforstock
piling,useandrepaymentoftheloans
Participateininformationawarenessmeetings,inplanning,andinmonitoringand
evaluationofwarrantageactivities
PaythestoragechargesassetbytheGeneralAssembly
Participateinthemonitoringandevaluationofinventorycredittransactions

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ARTICLE8:CONTRIBUTIONTOTHEMOBILISATIONOFRESOURCESOFTHEPRODUCER
ORGANISATION
Anamountcorrespondingto..............%ofthevalueaddedonthestocksaccumulatedby
individualsandgroupswillbedonatedtotheproducerorganisationtoestablishitsown
funds.

ARTICLE9:SANCTIONS
Dependingontheseverityofthemistake,eachmemberisliabletothefollowingpenalties:
(i)warning,(ii)reprimand,(iii)suspension,and(iv)exclusion.Memberswhobytheiractions
orconductobstructthesmoothrunningofoperationswillbeexcludedfromwarrantage.
Anypenaltyresultingintheexclusionofamembershallbesubjecttoapprovalofthe
GeneralAssemblybyamajorityofthemembers.
Incasesofnonrepaymentofloans,aprocedureofamicablesettlementwillbeinitiated.If
thisisnotsuccessful,thecasewillbereferredtoacompetentjudicialauthority.

ARTICLE10:FINALARRANGEMENTS
Theserulesofprocedureareadoptedbythegeneralassemblyon........
TheBoardoftheproducerorganisationisresponsibleforensuringitsimplementation.
TherulesofprocedurecanonlybemodifiedbytheGA.
Compliancewiththeserulesofprocedureforwarrantageoperationsismandatory.

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Warrantage of agricultural products

Referencesheet4:Templateforawarehousedepositreceipt
(warrant)

Department/Municipality:
Nameofproducer:
.
Nameofthechairmanoftheproducergroup:.
Villageofthegroup:
.
Warehouse/storeof:

Nameofstoremanager:

Featuresofstoredgoods

Appliedtreatments Quality
Quantity
Typeof
Humidity %
Gradeof Appreciation
(bags/containers/bottles)
Quantity
products
content breakage impurity Good Average

Products

Dateofdeposit:

Signature

Nameofbookkeeper

Signature

Nameofstoremanager

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Referencesheet5:Registerofwarrantedstocks

Nameofgroup
Nameofvillage
Nameofunion
Nameofchairman
Dateofstorage

:.
:..
:.
:.
:
Product1

Nameand
No. surnameof
producers

Quantity

Product2
Quality

Totalvalueof
Initial
stock
valueof
stock

Signaturefor
receipt

Quality

Initial
valueof Quantity
stock

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Warrantage of agricultural products

Referencesheet6:Howtostorebags

Storagefacilitiesforwarrantedgoodsneedto:

belocatedinwelldrainedterrain,notsubjecttofloodingandwithouttheriskoffire(no
adjacenthousesnorbush),
haveaproperroof,protectingthestoredgoodsfromtheweather,
haveawatertightfloor,
besufficientlyventilated,
freeofratsandmiceandallstockshouldbekeptfreefrompests(termites,weevils,
beetles,moths),
havesafetydevicesondoorsandwindows,
benottooisolatedfromthevillage.

Howtostorethebags

Arrangeastackthebagsofseverallayers.

Thestackshouldnotexceedtheheightof
aman.

Eachlayershouldcontainsfivebagsof
threeinonedirectionandtwoataright
angle.

Neverstoreinfestedproductsinthesame
roomwithhealthystocks.

Leavespacebetweenthestacksofbags
andthewalls.

Makeseparatestacksforeachproduct.

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Referencesheet7:Tableforstocktaking/Reportofthejoinedvisits
ofthelocalbranchofthemutualagriculturalcreditscheme
producerorganisations(CLCAM)andtheRegionalCentrefor
AgriculturalPromotion(CERPA)

Nameofmunicipality:
Centralstoreno.
:
Namevillage
:

Stocklevelsatvariousmomentsintime
Commodity

Initialstocks
Quantity

Quality

Datefirstcheck
Quantity

Quality

Datesecondcheck Datethirdcheck

Quantity Quality Quantity Quality

OBSERVATIONS

Firstcheck

.
FirstandsecondnameofcontrollerSignature

Secondcheck

.
FirstandsecondnameofcontrollerSignature

Thirdcheck

.
FirstandsecondnameofcontrollerSignature
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Referencesheet8:Scoringgridforthefundingofbusinessplans

QUALIFIERS

ASSESTSOF
THEPO

STORECONDITIONS

CRITERIA
Theproducerorganisation
(PO)hasaliabilitydebt
ThePOhasalegalstatus
ThePOhasawarranty
ThePOhasanupdated
policydocument

ThecompetenceofthePO
regardinginputsupply
ThecompetenceofthePO
regardingjoinedmarketing
Proximitytomarket,
existenceofademand

Buildingmaterials

NOTES

New
New
Weak

Solidmaterials

Storeequipment

Sufficient

Storedoors

Withan
integrated
doublelock
system
Storetreated
againstpests;
noratholes
present,

Pestinfestations

NOTE
Tobeeliminated
Donoteliminate

Morethan1
year
Morethan1
year
Existing

Localbuilding
materials(mud,
straw,poles)
Nonsufficient

Withoutan
integrated
doublelock
system
Signsofpest
infestationin
thestocks

NOTE :/4

VERIFICATION
Documents,
interviews,
visits

Interviewand
contracts

NOTE :/12

NOTE :/4
NOTE :/4

NOTE :/4

Interview,visit

NOTE :/4
NOTE :/4

NOTE :/4

102SCALE Learning Module 7 Warrantage of agricultural products Reference sheets

RATING

NOTE :/16

COMMENTS

MODULE 7

SAFETYOFTHESTORE

CRITERIA
Locationofthestore

QUANTITYANDETQUALITY
OFTHESTOCKDUSTOCK

Guardian

Physicalstoreenvironment

Quantity

Quality
Storageduration

Warrantage of agricultural products


NOTES
Locatedinthe
Isolated
villageunder
location,no
collective
surveillance
surveillance
Presence
Absence

NOTE
NOTE :/4

Immediate
surroundings
notliableto
flooding,no
combustible
materials
present

Sufficient

Immediate
surrounding
liableto
flooding,
patchesof
strawdrybush
near

NOTE :/4

insufficient

NOTE :/4

Required

unsatisfactory

bad

NOTE :/4

good

VERIFICATION
Interview,visit

RATING
NOTE :/12

Interview,visit

NOTE :/12

NOTE :/4

NOTE :/4

TOTAL../52

Note:TheindicationtobeeliminatedmeanspostponingthefinancinguntiltheProducerOrganisationmeetsthestandardsset.

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COMMENTS

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Warrantage of agricultural products

Referencesheet9:Stockpledgeagreement/Collateralmanagement
agreementforagriculturalproducts

Group..of.villageofthecommunityof..,
representedby...,actingas,offersas
collateralforaloanof..(currencyunit),approvedbythefinancial
institution,in..thestockofthefollowingproducts:

Products

Descriptionofthequality

Maize
Rice
Etc.
Totalvalueofcollateral

Quantity(kg)

Value
(currencyunits)

Thestockislocatedin...,undertheresponsibilityof
..andmaynotbesoldinpartorintotalbeforetheentiredebthas
beenrepaid,withouttheagreementofthefinancialinstitution...

Thestockremainsthepropertyofthegroupthatisresponsibleforitbutisatthedisposalof
thefinancialinstitution...thatsuppliedtheloan,guardedbythegroup/unionaslongas
thecreditandtheinterestshavenotbeenrepaidforthefull100%.

Incaseofstockdamage(duetoflooding,fire,theft,etc.)thegroup/unionisentirely
responsibleforthelossandisobligedtoreimbursetheloanplusinteresttothefull100%.

Incaseofnonrepaymentoftheloanorpartoftheloanbefore..(date),dueto
factorsexclusivelycausedbytheunionsorthegroups,thefinancialinstitution...may
orderandorganiseasaleofthestockorofpartofthestockinordertorefundthe
remainderofthedebt.Thepenaltyonnotpayingbackloansintimeisseton
(currency)per..(periodoftime).

Ifnonrepaymentoftheloanorpartoftheloanby(date)iscausedbysocio
economicfactorsorbytheState,thelosswillbesharedamongthedifferentoperators
accordingtotheearliergainsobtained.

Thefinancialinstitution.............commitstosendarepresentativeatleastonceevery
.daystoassistinstocktakingwithrepresentativesofthegroupsorunions,tocheckonthe
qualityofthestock.Incaseofdamagetothestockbecauseofdisrespectingtheregular
checks,thelosswillbebornebytheresponsibleparty.

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Thefinancialinstitution..............................willundertaketofreethestockassoonas
thefulldebthasbeenrepaid(byashowofhands).

Madeupat.
On.(date)

Signatureofgroup/unionrepresentative
Signatureofrepresentativeoffinancial

institution

Nameandsurname
Nameandsurname

Function
Function

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Warrantage of agricultural products

Referencesheet10:Warrantagecontract

Between,

The financial institution ......................represented by (responsible


person)..
ontheonehand,and

the..group,representedbyitspresidentofthecommunityof
village..Zone/Sector.

ontheotherhand

Itwasagreedthat:

Thegrouprequestedandobtainedfromthefinancialinstitution.........

1. awarrantagecredituponastockdepositguaranteeincentralstoreNo.worththe
valueoffrancsCFA/currencyunit,anddetailedasfollows:

Commodities
Maize
Rice
Total

Quantities
(bags)

Actualprize
(currencyunit)

Amount
(currencyunit)

Ataninterestrateof............................,thefilingfeesare...................CFA/currencyunit.

2. Thecreditperiodisonaverage..........months,butmaybeshortened.

3. Incaseoffailuretomeetthedeadlineofthecreditperioddueto:
factorsonlyattributabletotheUnionsandgroupingswithoutproperreason,the
groupagreestobearadefaultinterestrateof..................................underafixed
termagreement.Incasethetermisexceeded,saleswillbeforced.
poorsalesorfactorsattributabletosocioeconomicconditionsand/ortheState,the
financialinstitutionandthegroupworktogethertofindasolution.Inallcases,the
riskissharedbyallpartnersincorrespondencewiththeannualgains.

Signedin(place)...on(date)20..

Thechairmanofthegroup

Themanagerofthefinancialinstitution

NameandsurnameNameandsurname

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Referencesheet11:Theprinciplesofimplementationofa
warrantage/theinventorycreditsystem

Todevelopfairinternalrules(takingintoaccounttheinterestsofdifferentsocialgroups,
particularlythepoorest),thatareunderstandable,developedinaparticipatoryprocess,
translatedintolocallanguages,andareknownandrespectedbyeveryone
Torespectthedecisionofthemeetingonthetypesofproducts,qualities,quantities
producedandstored(amountpermember,totalamount)andontheretentionperiodof
thestock
Toovercomeatimegap,negotiatewiththedecentralisedfinancialsystem(DFS)sothat
stockcanbebuiltupinseveralstages
Toensurethatmanypeoplecanaccesstheinventorycredit,especiallythepoorest,one
can,forexample:i)limitthenumberofbagsthateachindividualcanbringin,ii)havea
managementcommitteethatfairlyrepresentsPOsmembership,iii)acceptgroupingof
peopleforstockbuilding
Tohavearegularsystemofmonitoringpricesinthemarketsoftheproductsstored:
Informationonmarketsareessentialforbothlenders(decentralisedfinancialsystem,
banks)andborrowers(producers,POs,traders,storekeepers)tominimizerisks
speculationrelatedtothestorageofagriculturalproducts
Toensureproperreimbursement,thecreditgrantedtotheproducerorganisation(PO)
mustnotexceed80%ofthevalueofthecropatharvesttime
TostrengthenthefinancialcapacityofthePOandtoallowittoincreaseitsstorage
capacityandtakecareofcostsrelatedtothewarrantage(storeinventoryand
maintenance,security,training,etc.),thePOmustsetupadepositorscontribution
systeminproportiontotheamountsdeposited(forexampleanamountperbag)
Tosetupincomegeneratingactivities(IGAs)andavoidwastingitonsocialspending
theIGAsselectedshouldallowtorefundthecredit.
Tomakesuretoidentifythestockofeachapplicantanddepositor(writingthenameson
thebags)
Tosticktoadoublelocksystem(withkeyskeptseparatelybytheDFSandbythePO)
Toavoidtoextendawarrantagecredittoanindividualtoreducerisksandanexplosion
ofstores
Topayattentiontosubsidizedsalesbythegovernmentasthesemaydisturbtheproper
settlementofwarrantageoperations
Tosetupa"businessintelligence"pricemonitoringsystem,ifpossiblewithahistorythat
wouldseeperiodsofsubsidizedgovernmentsales.Aquicksurveycouldbeusefulinthis
regard
Tomakesuretohaveagoodknowledgeoftheenvironment,oftheseasonalactivities,
andoffarmincomes

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