Structured Trade and ICTs - WRS/CEX


Organised by: CTA


Warehouse receipts and exchanges can play in a significant role in addressing some of the key problems in agriculture – lack of access to finance, poor price discovery, large market inefficiencies. However, using traditional approaches, warehouse receipt systems and commodity exchanges can be prohibitively expensive to set up. The fast development of ICT in this domain has, however, radically changed the situation. What opportunities has ICT opened up for African countries to implement these mechanisms on the ground, and what are the key steps that governments and the private sector have to take to realise the potential?

Nov 5, 15:30 - 17:00
Room: Kivu
Stream: Emerging Innovations

Sessions Chair


Chair of the session is Lamon Rutten
Programme Manager, Policies, Markets & ICT, CTA

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Presentations


EAX Rwanda


The East Africa Exchange (EAX) is a regional commodity exchange, which was established to link smallholder farmers to agricultural and financial markets to secure competitive prices for their products and facilitate access to financial opportunities. The first leg of the regional exchange platform is based in Rwanda and will trade products from within and outside Rwanda.

The exchange was launched in January 2013 in Davos, Switzerland at the World Economic Forum by H.E. President Paul Kagame, Nicolas Berggruen, Tony Elumelu, and Jendayi Frazer to promote regional integration, private-sector-led development, and equal access to financial inclusion for the rural poor in East Africa and the continent at large.


The application of ICT in a WRS repo financing system


The CCH Commodity-backed Warrant Scheme for Integrating Commodities Trade-Financing in the Ghanaian Money Markets via ICTThe CCH Commodity-backed Warrant Scheme in Ghana has significantly shifted lending from cash flow based to asset based; a shift from loan risk assessment focussing on fixed asset securitisation to commodity asset securitisation. The CCH serves as intermediary between the commodity traders and producers, and the money market. It does so by taking temporary ownership of the commodity through a sell buy-back agreement (repurchase agreement).Further, it secures the commodity asset through collateral management arrangements fully guaranteed against loss or degradation through a performance bond guarantees; and comprehensive all risk insurance coverage.CCH then issues warrants against these assets. Entry into the money market of the issued warrants requires inspection and qualification by the Central bank. The issuance and trading of the warrants in the money market is strictly controlled by the Bank through monitoring of the “Warrant Book” – an on-line, real-time trading and monitoring platform.Therefore, the money market is able to securely trade in CBWs as a result of the guaranteed securitisation of the commodity asset, as well as, the guarantee of pay back on maturity of warrants through the Warrant Book. This scheme recognises the value in the commodity, and de-emphasizes focusing on the producers for financial risk assessment.It is a scheme that is characterised by the speedy accumulation, analysis and transfer of data in a secure and interactive manner.The scheme facilitates a shift from rights of transaction inherent in the commodity, as in direct market trade of commodities (which would involve the cumbersome and expensive movement of commodities at each sale), to property rights made inherent in the covering warrant which would be readily and efficiently traded on the basis of electronic data flows (convenient, instantaneous and inexpensive).

Organization : CCH Finance House Ltd.

CCH Finance House Ltd (CCHFHL) is a commodity trade finance house set up by the Commodity Clearing House Ltd for the financing of commodities through the discounting of commodity sell backs. The company was incorporated as a private company on 30th May 2005. The ultimate objective of CCH Finance House is to innovate structured finance of the soft commodity trade market in Ghana, and to carve a niche as specialists in commodity financing by providing appropriate and easy access to financing for increasing agriculture incomes and improving the standards of living of all stakeholders. This is against the backdrop that Ghana is a predominantly agricultural economy and the fastest and most sustainable path to economic development is through an improved agricultural sector.

http://cchfhl.com/


The role of commodity exchanges/warehouse receipting in addressing key agricultural challenges


Warehouse receipts and exchanges can play in a significant role in addressing some of the key problems in agriculture - lack of access to finance, poor price discovery, large market inefficiencies.However, using traditional approaches, warehouse receipt systems and commodity exchanges can be prohibitively expensive to set up.The fast development of ICT in this domain has, however, radically changed the situation.What opportunities has ICT opened up to African countries to implement these mechanisms on the ground, and what are the key steps that governments and the private sector have to take to realize the potential?

Organization : Agricultural Commodity Exchange for Africa (ACE)

The Agricultural Commodity Exchange for Africa (ACE) is a spot and forward market commodity exchange, meaning that all contracts require a physical delivery of commodities either immediately, or at a specified future date.

Contracts on ACE will clearly specify commodity specifications. ACE has adopted widely used regional commodity quality standards as ACE standards for this purpose, to create a general reference point for trade in agricultural commodities. ACE is promoting the harmonisation of standards, but will trade using any specified quality specifications, until the market moves towards more harmonised quality standards. On ACE it is up to the buyer and seller to agree which quality specification to use and to specify these in the contract.

ACE is promoting three main concepts of trade integrated into the ACE trading system.

http://www.aceafrica.org/default.aspx


Warehouse receipt systems, commodity exchanges, and ICTs


Warehouse receipts and exchanges can play in a significant role in addressing some of the key problems in agriculture - lack of access to finance, poor price discovery, large market inefficiencies. However, using traditional approaches, warehouse receipt systems and commodity exchanges can be prohibitively expensive to set up.The fast development of ICT in this domain has, however, radically changed the situation.What opportunities has ICT opened up to African countries to implement these mechanisms on the ground, and what are the key steps that governments and the private sector have to take to realize the potential?

Organization : NEPAD Business Foundation

The NEPAD Business Foundation (NBF) is one of Africa's leading membership based foundations which promotes sustainable economic and social development on the continent. The NBF is a non-profit company that mobilises private sector support for the implementation of New Partnership for Africa's Development (NEPAD) goals.

The NBF views business in Africa as a fundamental building block for positioning the continent as a key role player for international trade and investment. As a neutral and trusted partner, the NBF provides a networking platform for its members to discuss, debate, share ideas and collaborate with the public sector and other stakeholders in investment, project or commercial activities.

The NBF currently has offices in South Africa and Mozambique with a much wider geographical footprint in the rest of Africa in terms of strategic stakeholders and managed projects. The NBF plans to expand its physical representation to a further five countries in order to better serve stakeholders.

http://nepadbusinessfoundation.org/


Warehouse receipt system in Malawi


For 2 seasons the receipt system in Malawi has proven significant benefts to the depositors. On average the added value (price increase) as been 56 % and the average profit to the depositor as been 31%. The content will go through the numbers and let them speak for themselves. The challenge in Malawi is now to scale up the system. We will look at the situation on the ground and what it will take to get further development. The bottlenecks are finance and insurance - we will look into the reasons for this.

Organization : Agricultural Commodity Exchange for Africa (ACE)

The Agricultural Commodity Exchange for Africa (ACE) is a spot and forward market commodity exchange, meaning that all contracts require a physical delivery of commodities either immediately, or at a specified future date.

Contracts on ACE will clearly specify commodity specifications. ACE has adopted widely used regional commodity quality standards as ACE standards for this purpose, to create a general reference point for trade in agricultural commodities. ACE is promoting the harmonisation of standards, but will trade using any specified quality specifications, until the market moves towards more harmonised quality standards. On ACE it is up to the buyer and seller to agree which quality specification to use and to specify these in the contract.

ACE is promoting three main concepts of trade integrated into the ACE trading system.

http://www.aceafrica.org/default.aspx