Transcript warrantage in niger: adaptations for a developing country presentation

Warrantage in Niger:
Adaptations for a developing country
Emilio Hernandez
Agricultural Finance Officer
FAO/AGS
20 September 2012
Introduction:
Some country facts
•
GDP per capita is USD 800
•
43.6% of population below
USD1.25/day
•
Exports go to Nigeria (68.3%);
USA (12.2%) and Ghana (9.8)
•
Paved roads coverage 3,912 Km
•
39% of GDP is agriculture, with
sorghum and millet as staples
•
Government-owned fertilizer
monopoly
Source: WFP, 2009
Warrantage systems:
The local adaptation
Source: Adapted from LeCoutois and Olofsson, 2010
Warrantage systems:
Some recent facts
1. All of the 132 MFIs in the country offer
warrantage products
2. In 2009 it represented roughly 8% of their
portfolio value
3. Repayment rates are above 97%
4. In 2004 there were 104,741 clients; rural
penetration rate of warrantage estimated at
5.3% (up from 3% in 2001)
Source: The MIX, 2012 and LeCoutois and Olofsson, 2010
Why does warrantage work in Niger?
1) Predictable timing of price peaks
Source: Afrique Verte International, 2010 and the author
Why does warrantage work in Niger?
2) Constant demand outlet to Nigeria
•
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68% of exports go to
Nigeria, most of them
consisting of millet,
sorghum and onion
surpluses
Nigeria as a net importer
of cereal and having
higher purchasing power
absorbs any surplus
Niger is able to produce
Why does warrantage work in Niger?
3) Functional federations and coops
 The constant demand for cereal imports from
neighboring Nigeria has created stable business
opportunities for farmers in Niger
 Through their organizations, farmers have
worked steadily to benefit from these
opportunities by building storage facilities and
making joint loan requests backed by cereal
stocks
Why does warrantage work in Niger?
4) MFIs know the value of stocks
 Understanding cereal markets enable
MFIs to accept stocks as collateral,
given their ability to liquidate it in case
of default
 The character-based
assessment of
creditworthiness, enables
MFIs to lend to producer
organizations under a weak
contract enforcement
framework
How do agricultural households use warrantage credit?
It’s all about smoothing cash flows
 Households use loans to finance trading and
marginally for vegetable production. Very rarely
is the loan used to purchase agricultural inputs
for the main staples
 These short-term activities enable the
generation of cash while cereal prices improve
and revenues are used to pay the loan
 From 2001-2010, a sample of 34 POs shows
cereal price differentials were superior to
principal, interest and fees in 71% of the cases
Conclusions and policy implications
 The combination of stable agribusiness
opportunities, strong farmer organizations and
lenders familiar with agricultural markets that
makes warrantage work in the country
 The core business condition is not easy to
replicate by governments and development
agencies in other contexts
 It is key that interventions recognize this
condition to support warrantage initiatives led by
local farmers, traders and lenders
Thank you!