WFP is using what's known as the Warehouse Receipt System to procure food directly from small-scale farmers in Malawi. By selling to WFP through this innovative system, Alice, a farmer in Lilongwe district, was able to access a loan for the first time.
WFP requires tens of thousands of metric tonnes of food each year to run food assistance programmes in Malawi. Where possible, commodities are purchased locally through the Purchase for Progress (P4P) initiative – benefitting Malawian farmers, bolstering the national economy and promoting the development of structured market demand.
In partnership with the Agricultural Commodity Exchange for Africa (ACE), WFP uses what is known as the Warehouse Receipt System as one way to facilitate market access for smallholders.
This is how it works: farmers deposit maize in WFP-certificated warehouses where it is stored, cleaned, graded and protected against pests. In return, the supplier obtains a receipt, which can be used at any time to reclaim the commodities or to act as collateral to obtain a bank loan. These receipts mean that farmers can put money in their pockets immediately after the harvest, while their commodities remain in a warehouse for safekeeping until market prices go up.
“To me, the most interesting part of system is the access to credit and the ability to sell to big buyers like WFP,” says Alice Kachere of Lilongwe district, a smallholder who made a sale to WFP this year thanks to the WRS.
By the end of August 2013, Alice had deposited her surplus bags of maize, plus additional maize she had bought from local vendors, into a nearby WRS-certified warehouse. Her total deposit climbed to 65 metric tonnes of maize, earning her a receipt worth MWK6.7 million (approx. US$ 17,000).
“I felt very proud,” says Alice who was able to access a loan for the first time in her life. “I put the money towards aggregating more maize and preparing my own small farming business.”
Alice says that, for women in Malawi, it is difficult to access credit as they rarely have the required collateral such as a title deed – either this does not exist or it is in the name of a man.
The access to credit and to markets provided by WRS is particularly significant for women, who comprise 42% of P4P farmers in Malawi. Women often face higher barriers to engage the formal agricultural market due to a ‘gender gap’ in agricultural production, resulting in women having less access to and control over productive resources than men.
In early 2014, using a cash contribution from USAID, WFP purchased all of Alice’s maize from the warehouse receipt system for distribution as part of its 2013/14 seasonal relief operation in Malawi. Alice was therefore also able to help less fortunate Malawians who were facing hunger in areas of food shortage while she herself remained debt-free.