Empowering agriculture: exploring warehouse receipt systems for financing producers in Tanzania
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Date
2024
Authors
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Journal ISSN
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Publisher
Sokoine University of Agriculture
Abstract
The Warehouse Receipt System (WRS) was initiated by the
government to enhance financing for cashew nut producers, ensure a
fair and stable market, and enable producers to store their yields in
warehouses for later sale at more favourable prices. However,
producers still express dissatisfaction with the system due to lack of
transparency. Moreover, the WRS is criticized for its complex lending
procedures and high interest rates when financing smallholder
producers, which deter producers from utilizing the system to borrow
money. Therefore, this study aimed to assess the effectiveness of
warehouse receipt systems for financing cashew nut producers in
Tandahimba District, Tanzania. Specifically, the study identified
smallholder producers’ perception and acceptance towards the
usefulness of WRS in accessing finance from financial institutions,
challenges facing smallholder producers in accessing finance from
financial institutions through WRS and the factors influencing cashew
nut smallholder producers to access finance from financial
institutions. A cross-sectional research design and a mixed methods
research approach were adopted. The study included 122
participants who included 100 smallholder cashew nut producers as
respondents, 8 WRS operator officers, 6 bank officers and 8
extension officers as key informants. Simple random sampling
technique was used to select smallholder cashew nut producers for a
household survey while purposive sampling technique was used to
identify WRS operator officers, bank officers and extension officers
for interview. Data were analysed using IBM SPSS to compute
descriptive statistics, particularly frequencies, percentages, means
and standard deviations. Moreover, binary logistic regression was
used to determine influence of WRS related factors on access to
finance from financial institutions. The findings show that smallholder
cashew nut producers had a negative perception and acceptance
towards the usefulness of WRS in accessing finance because WRS
neither assisted producers to access loans on time nor offered
collateral to producers to enable them access credits from financial
institutions. Likely, WRS did not assist producers in ensuring that
there were proper lending procedures to reduce risks to the financial
institutions. Also, it did not provide financial and credit information to
smallholder cashew nut producers. The challenges facing smallholder
producers in accessing finance timely included low investment in
financing cashew nut producers (92%), delayed loans (82%), lack of
enough understanding regarding loan process/provisions in financialinstitution 73(73%), producers being not sure of whether on a promise
of payment (68%), and lack of loan guarantee from WRS (64%).
Further, the factors influencing cashew nut smallholder producers to
access finance from financial institutions were age of the producers’
(ß = 1.421, p = 0.001), having financial statements for at least three
years of producers’ in cooperatives (ß = 1.249, p = 0.027),
membership to cooperative union (ß = 1.562, p = 0.014), absence of
criminal cases (ß = 0.931, p = 0.042), certificate of maximum liability
from registrar of cooperatives (ß = 2.556, p = 0.011), minutes of the
meeting which approved application for the loan from cooperatives (ß
= 1.257, p = 0.041), farm/ land size (ß = 0.824, p = 0.044) and
effectiveness of cooperative association in linking producers’ to
getting a loan from a financial institution (ß = 0.921, p = 0.032). The
findings suggest that producers who fulfilled the mentioned factors
were more likely to secure finance from financial institutions. These
factors contribute to building trust and credibility in the eyes of these
institutions. The findings also revealed that smallholder producers are
still facing significant challenges in accessing loans through the
Warehouse Receipt System (WRS). These challenges included
insufficient investment in financing cashew nut producers, delays in
loan disbursement, limited understanding of loan processes and
provisions among producers, uncertainty regarding the fulfilment of
promised payments, and the absence of loan guarantees from the
WRS. These difficulties resulted in a decline in both agricultural
production and marketing activities in the study area. The knowledge
generated from the study may assist the cashew nut board in
Tanzania through WRS to make a self-evaluation on how effective it
has been involving cashew nut producers to access finance through
their system; hence, take effective measures to lobby for
improvement and formulation of policies considering the factors,
challenges and perception and identified for efficient access to
finances among the cashew nut smallholder producers.
Description
Dissertation
Keywords
Warehouse Receipt System, Smallholder Producers, Cashew Nut Farming, Financial Access, Tandahimba District