Warehouse Receipt Financing Collateral Management System to Promote

Warehouse Receipt Financing & Collateral Management System to Promote Agriculture Financing Kashif Umar Thanvi HBL 29 April, 2015 Islamabad 1

Warehouse Receipt Financing Value Chain Financing Instrument System of Warehouse Receipt e io ct In s nc ura pe Ins n Personal indemnity Warehouse Receipt Warehouse Credit Produce Farmers Trade isn't about goods. Trade is about information. Goods sit in the warehouse until information moves them. ” -C. J. Cherryh 2 HBL Rural Banking

Warehouse Receipt Financing Landscape Ø Sizeable portion of Pakistan’s agri-produce is wasted due to inadequate storage facilities, in-efficient supply chain Ø The security offering for agriculture financing is agriculture landless farmers working on leased lands often fail to get formal financing ØThe rate of informal lending is three fold i. e. at purchase of inputs, at sale of goods and negative weight variation while purchasing of goods ØFinancial Institutions are reluctant to provide financing to farmers based on agri-produce due to lack of warehousing infrastructure, regulations and information regarding quality and quantity of agri-produce, farmer credit profiling etc. ØGrowth in Agriculture in FY 14 was only 2. 1% - much slower as compared to other sectors of the economy 3 HBL Rural Banking

Warehouse Receipt Financing Process Release Order 8 Weight & Quantity Checks RELEASE OF GOODS…. . HBL Rural Banking

Warehouse Receipt Financing Benefits of WHR Financing Model to Farmers • Secure access to credit for farmers • Option to sell during price optimization period • Transparent Price Discovery • Reduction in crop losses • Increased competitiveness 5 HBL Rural Banking

Warehouse Receipt Financing Benefits of WHR Financing Model to Banks • Development and augmentation of acceptable collateral • Enhanced reach to small farmers • Better monitoring of stocks through online tools • The fidelity insurance by collateral manager minimizes the risk of staff embezzlement / misconduct 6 HBL Rural Banking

Warehouse Receipt Financing Challenges 7 Gap Analysis with International Successful Models Farmer Economics & Cost Benefit Analysis Selection of Warehouse Establishment of Borrower Selection Criteria Legal Agreements & Local Laws Commodity & Storage Operations Collateral Manager Guarantees & Indemnities Farmer Awareness and Marketing Activity 7 HBL Rural Banking

Warehouse Receipt Financing Going Forward 8 Graduatio n of WHR as a Regulato security vs. rythe Authority commodi for ty Collateral Manager Registrati & on and Warehou Linkage se with Operator Pakistan Mercantil e 8 HBL Rural Banking Exchange

Warehouse Receipt Financing THANK YOU 9 HBL Rural Banking