11.06.2013

These situations tend to create liquidity problems in the trade and reduce the number of traders competing to buy up the crop at harvest – competition can improve producer prices. Some farmers can also take advantage of the WRS to market value-added commodities. For instance, instead of rice farmers selling paddy rice, they can deposit the paddy with designated millers who process it for a fee. Farmers who use the WRS in this way can obtain financing against the stored paddy to meet household consumption and other needs while waiting for the crop to be processed and the milled rice sold, creating an opportunity to increase household income. This has occurred e.g. in the coffee and cotton sub-sectors in Tanzania and Uganda respectively.

Improving access to credit by providing suitable collateral.
The WRS eases access to credit for farm households. Applying for the inventory credit tends to be simpler as it often does not require elaborate applications with cashflow statements that most smallholders are unable to produce.