By AGRA Content Hub

The Warehouse Receipt System (WRS) launched in July 2020 by Kenya’s Ministry of Agriculture Livestock, Fisheries and Cooperatives (MoALFC) holds the promise of increased incomes for smallholder farmers through a reduction in post-harvest losses and price exploitation by middlemen.

The WRS was activated after a successful pilot in 2017 by the East African Grain Council supported by the Alliance for a Green Revolution in Africa (AGRA). According to AGRA, during the trial period, nearly 13,000 smallholder farmers trained on post harvest management transacted about KSh 100mn (USD 1mn) worth of grain on the WRS, where 19,000 metric tons of maize was sold.  

“The WRS signifies increased income for smallholder farmers. For instance, the Mwihoko Self Help farmer group in Nakuru County increased its income by 11 percent (the equivalent of KSh24,975 or USD231) by storing 10 metric tons of maize for six months” said John Macharia, AGRA’s Kenya Country Manager.

Under the WRS, owners of commodities – producers or dealers – deposit produce in any of the certified five warehouses belonging to the National Cereals and Produce Board. The MoALF is evaluating six more warehouses owned by cooperative societies across the country, according to Samuel Ogola, the acting CEO of WRC. At the warehouse, the produce is tested, cleaned, graded and then stored, with the owners receiving a receipt as proof of ownership.

 “The WRS reduces the pressure on farmers to sell their produce immediately after harvest when prices are usually low. The system empowers farmers to make decisions as when to sell by giving them the option not to sell under distress at harvest when prices are low,” said David Ombalo, Principal of Agriculture at the MoALFC.

The receipt can also be used as collateral to access credit from participating financial institutions or traded in commodity markets.

“The system collateralizes the warehouse receipt which, as a document of title, can be used to get credit…something which cannot be achieved if the produce was at farmers’ homes because there is no guarantee that it will be kept safely,” Ombalo said.

The system took effect after the Kenya Parliament passed the WRS Act 2019 providing a legal and regulatory framework for its development, and establishment of the Warehouse Receipt Council (WRC).

AGRA played a key role in the establishment of the WRS by supporting the agriculture ministry in preparing the regulations and other institutional frameworks needed to make it operational in Kenya.

“This (WRS) took over eight years to be made, like many laws. AGRA was able to do study tours to South Africa, through the existing grain bulk handlers, where members of parliament were able to see in practice how it works; and, indeed, when they came back, the law was enacted,” said AGRA’s policy officer, Rachel Shibalira.

The WRS has proven important in encouraging the meaningful participation of women and youth in agriculture, added Shibalira.

“The WRS is a tool that will empower the smallholder farmers, and to cut it even closer, empower women and the youth. They [women and youth] can act work in groups to aggregate their produce and present that to the warehouse, where they obtain a receipt that is now collateral enabling them to access finance,” she said.

As the WRS advances, it is encouraging the aggregation of produce by small scale farmers enabling them access to large traders, processors and governments, from whom they get better prices. In coming days, the WRS will also be important in promoting the participation of farmers in the national commodity exchange.

“The warehouses, when linked to the commodity exchange, will participate in the competitive discovery of prices. A commodity exchange merges buyers and sellers, and the receipts owned by depositors can be taken to the exchange for buyers to bid on,” Ombalo said. 

In such ways, the WRS is helping alleviate the problems of poverty and food insecurity in Kenya, by reducing post-harvest losses, which represent 35 percent of the food produced in the country, according to Ombalo. Maize, in particular, has been constantly wasted, even as it remains an important staple food for Kenya.

“If 45 million is the number of bags we produce, then 10percent alone is already 4.5 million bags…sometimes the loss is equivalent to what we import,” Ombalo said.

In conclusion, Ombalo noted that sustaining the implementation of the WRS will lead to a transformation in farming and the trade of agricultural commodities