Improving Agricultural Market Performance:
Creation and Development of Market Institutions
88
In the four years since it was established, NIRSAL has catalyzed a 600% increase in
agricultural lending by Nigerian banks, from 0.7% of total bank lending to 5.0%,136 with total
lending to date of about US$273 million. Lending is not confined to direct agricultural
production but also targets enabling infrastructure and market-supporting activities, for
example, a rail-shipping venture linking struggling livestock producers in the north to
consumer markets in the south. 137 In another new venture, NIRSAL has announced a US$300
million lending scheme for young farmers, funded mainly by the AfDB.138
4.3 Warehouse Receipt System Financing
Warehouse Receipt System (WRS) financing is a facilitation function that can allow farmers,
traders, processors, and exporters to obtain finance secured by goods deposited in a
warehouse. Although the warehouse receipt mechanism is used for minerals and other
commodities, its main use is in agriculture.
Typically, the warehouse operator issues a receipt for the stored goods, which can be used as a
form of portable collateral to request a loan from a financial institution. Warehouse receipt
financing is especially useful for rural small and medium enterprises, which often lack
sufficient traditional collateral, such as immovable or movable property, to secure their
borrowing needs.
WRSs have long been used in developed countries as a facilitation device, as well as in many
developing countries, especially in Africa. They have not always been successful, usually
because the core elements are not in place. These include:
 An enabling legal and regulatory framework;
 A regulatory and supervisory agency;
 Licensed and supervised public warehouses;
 Insurance and financial performance guarantees;
 Banks familiar with the use of warehouse receipts.139
Additional preconditions for success include:
 The storability of a commodity;
 The existence of quality certification and grades;
 Market transparency and market information;
 Price volatility;
 Low financing costs;
 Predictable government policies.140
136 African Development Bank (2016), Keynote speech delivered by President of the African Development Bank (AfDB)
Akinwumi Adesina at the African Green Revolution Forum (AGRF) in Nairobi, 8 September, 2016, available at
[Accessed June 2017].
137 Makinde, K. (2017), Steady progress in agriculture, potential history in the making, available at
Accessed August 2017].
138 The Guardian (2017), “FG to launch $300m loan project for young farmers,” available a
[Accessed August 2017].
139 Hollinger, F., Rutten, L., & Kiriakov, K. (2009), “The use of warehouse receipt finance in agriculture in transition
countries,” FAO Investment Center Working Paper , 6-9 June, p. 8.