An inventory credit system (also known as a warehouse receipts system and "warrantage" in French) allows farmers to have access to credit while using their harvest as a guarantee for the borrowed funds. Under the system, a farmer’s harvest is stored in a warehouse or silo until his loan is repaid.
This short-term credit system protects farmers against low prices (generally at harvest when there is ample supply) by giving them access to credit when they need it most. The need for – and lack of – credit can force farmers to sell their crops to the first buyer at harvest, often at a low price. Then, the farmer often has to buy food and seeds a few months later at higher prices that might be unaffordable. A key advantage of the inventory credit system is that farmers can sell their crops in the months after the harvest, when market prices are higher.
The system is appealing to banks and other financial institutions because they can easily sell the stored crops if the borrower fails to repay his or her loan. Also, the crops increase in value with time.
Photo Caption and Credit:
Corn silo in Mozambique. Photo by Meg Ross
Inventory Credit System Information
Inventory Credit System Videos
Inventory Credit System - English Captions
Inventory Credit System - French Captions