More farmers under maize growing cooperatives are set to benefit from the warehouse receipt financing scheme, thanks to the East African Exchange (EAX).

In an interview with The New Times on Monday, Kadri Alfah, the EAX chief executive officer said about 10 maize cooperatives are already receiving credit from Ecobank and Urwego Opportunity Bank (UOB), two of the four banks EAX signed agreements with to finance the farmers.

The two other banks include Banque Populaire du Rwanda (BPR) and GT Bank, which Alfah said were developing loan products under the scheme and receiving internal training prior to lending the farmers.

Under the scheme, farmers who trade their grain through the commodities exchange can acquire credit of up to 70 per cent of the total grain value in custody of EAX.

"After depositing their maize in the warehouses, the farmers get warehouse receipts which they can present as collateral to get credit from banks,” said Alfah.

Alfah said the scheme was changing trends in agriculture financing given the fact that farmers were now accessing credit in a space of only two days and at favourable payment terms and interest rates.

"If a farmer wants a four month loan, the bank gets the current market interest rate of 18 per cent per annum, divides it by the 12 months in a year and then multiplies it by the four months.

Therefore, at the end of the day, the farmer pays an interest of six per cent, which is very favourable especially when he or she sells their grain at higher prices than at the time of borrowing,” he explained.

Alfah added that farmers repay the loans only after selling their produce and if they don’t manage to pay after an agreed period, the banks would extend the repayment period.

EAX was launched in 2013 to enable smallholder farmers sell their produce throughout the year at favourable prices.

Alfah said many farmers today sell their produce at low prices to middlemen, especially when they have surplus stock at harvest, to get quick cash to resume land preparation and planting for the next rainy season.

"Farmers don’t have to sell off all their produce immediately after harvesting at giveaway prices...We have enough warehouses to store the produce and sell it later at better prices. In the meantime, the banks can give them financing to prepare for the next season,” he noted.

He was optimistic that more banks and farmers would come on board as they get to understand the initiative.

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