Ethiopia’s agricultural sector, while crucial for the economy, faces challenges in productivity. While cereal production has improved over time, low levels of mechanization and limited access to modern technologies and finance hinder overall productivity.
The sector that employs around 70% of the working population and is an important pillar of the economy, accounting for 38% of the Gross Domestic Product (GDP), but with low productivity, cannot ensure food security for the rapidly growing population and is unable to provide an impetus for the necessary economic transformation. To meet these challenges, Ethiopian agriculture must become more productive.
To this end, a lot of work is underway to increase the productivity of the agricultural sector so that production and productivity are increasing every year. Farmers should benefit from this production and productivity properly.
However, due to the fact that farmers are not getting the right price for their products; middlemen have been benefiting more than them. In order to get the money needed for various services during the production period, they have been selling the products at a low price that could have been sold at a good price if deposited for some time.
Recently, a system has been developed to solve this problem for farmers. The “Warehouse Receipt Loan Service,” has been in operation for a long time; a project to expand this work was announced by the Ministry of Trade and Regional Integration (MoTRI) recently.
The Ministry, in collaboration with partners, believes that this project will strengthen and expand the warehouse receipt service. It is a system where farmers obtain loans by providing their products as collateral, and it allows them to obtain loans for various services without selling their products. It is a system that facilitates the sale of their products when the market price is adjusted, thus reducing the burden on farmers.
According to information, 20 years have passed since the issuance of the Warehouse Receipt System Proclamation No. 372/ 2003. However, as a commercial sector, it was only implemented in 2022. The information indicates that the results of the implementation over the past five years have been seen by creating the necessary structural organization and establishing a system that allows farmers to collect products and use them as collateral for loans.
MoTRI has recently announced a project that will help strengthen this warehouse receipt service system and expand its operation nationwide. The program will be implemented for two years; it is believed that it will help facilitate export trade, maintain product quality, and strengthen the warehouse receipt system.
The program is being implemented jointly by MoTRI, the “Alliance for Green Revolution in Africa” (AGRA) project, and the International Financial Corporation (IFC). It is expected that 150,000 farmers will benefit directly and indirectly over the two years of implementation, and about USD 12 million in trades or credit will be facilitated, according to the official program.
At the time of the project’s announcement, the State Minister of Trade and Regional Integration, Yasmin Wehabrebi, said farmers have been unable to access adequate storage and financial services to store their hard-earned produce due to the mismatch between demand and supply in the domestic market and the current reality. This has led to a low share of the price paid by the final consumer in the value chain, which has discouraged them from increasing their productivity.
The Ministry also noted that it has been working to modernize the trade value chain and facilitate financial provision to provide quality, quantity and variety of raw materials for export markets and to balance the demand and supply in the domestic market.
In recent years, the agricultural sector has been playing a significant role in the country’s economic growth by supporting and facilitating the structural transition to an export-oriented and industrialized economy, in addition to meeting the demand for food grains.
However, the long trade value chain in the sector has had a negative impact on export performance due to product waste and poor quality. Industries are struggling to obtain the raw materials they need in quality and quantity.
Understanding that one of the mechanisms that can digitize the trading system is the warehouse receipt system; the government has been working to implement the previously issued Warehouse Receipt System Proclamation No. 372/2003 nationwide. Yasmin announced that by creating the necessary structural organization for this, a system has been established that allows the use of crop products as collateral for loans.
The warehouse receipt service has been established as an independent business sector and has recorded excellent results since its implementation in 2022. Accordingly, more than 141 million quintals of crop products have been used as collateral and farmers have been able to take loans worth more than two billion Birr.
She also announced that it is working in cooperation and coordination with non-governmental development aid organizations that are essential for accelerating the country’s economic growth.
Non-governmental development partners, in accordance with the mandate and responsibilities given to them by the proclamation, have a significant role to play in ensuring sustainable development by identifying problems that the government has not addressed and by being part of the solution.
Bereket Meseret, the Executive Director of Export Promotion and Trade Facilitation at the Ministry of Trade and Regional Integration, on his part said the project is organized in a way that supports the proper storage of agricultural products and reduces the problems encountered during the post-harvest period.
He mentioned that farmers have the opportunity to take loans directly from banks in the usual way, and first the quality of the farmer’s produce will be assessed and stored in a warehouse. The farmer will be given a certificate for the amount of produce stored in the warehouse, and a receipt will be issued to him and then allowed to take a loan by registering that receipt as a fixed asset. A certain fee will be paid for storing it in the warehouse; there will also be a reasonable interest rate.
He also indicated that six types of grains, including wheat, soybeans and corn, have been identified for the time being. Other agricultural products will be identified and included in the new warehouse loan service as they progress.
The project will be implemented for two years; up to 15 banks will be involved; up to 45 thousand tons of products will be used in the service. A system will also be created where the products can get loans based on the current market price.
The CEO of the Ethiopian Commodity Exchange, Mergia Baisa, said the warehouse receipt service was announced 20 years ago, but it has only recently been put into use. Especially, after the Ministry of Trade and Regional Integration took responsibility and implemented it, they have been conducting pilot projects. In this process, the Ethiopian Commodity Exchange has also been working as a warehouse operator.
There is a situation where farmers’ cooperatives, unions, and domestic value addition organizations that do not have access to financial inclusion can benefit from this opportunity.
In this regard, the Commodity Exchange has been working intensively on awareness creation in the past two to three years. By training users and creating awareness by visiting various warehouses, it has enabled others to benefit.
This is still in its infancy stage compared to the country’s diverse production and the lack of access to finance for its farmers. Much more needs to be done in this regard by expanding the program launched with AGRA, the IFC and MoTRI; it is possible to create awareness among farmers and make them beneficiaries of finance. He emphasized that he believes the Ethiopian Commodity Exchange, as an institution and as an operator, will be able to further expand its services by participating in the process.
Several platforms have been created in collaboration with IFC through training and awareness-raising. In this regard, he mentioned that they were able to create awareness by visiting many places in Bale, Nekemte, Bahir Dar, and Jimma. This will be strengthened in the future and that farmers and cooperatives in particular will benefit from this service.
The State Minister Yasmin mentioned that one of the mechanisms that can modernize the trading system is the warehouse receipt system and that this has been implemented in a manner that involves stakeholders, including the private sector.
She explained that the results of the warehouse receipt system have been seen in the implementation since 2022, and that 141 farmers have benefited from loans of 2.2 billion Birr using 553,160 quintals of grain as collateral.
BY BACHA ZEWDIE
THE ETHIOPIAN HERALD THURSDAY 29 MAY 2025
