Using Commodities as Collateral for Finance (Commodity-Backed Finance)

doi:10.1596/28318

Publication:
Using Commodities as Collateral for Finance (Commodity-Backed Finance)

dc.contributor.author	Varangis, Panos
dc.contributor.author	Saint-Geours, Jean
dc.date.accessioned	2017-09-12T20:53:09Z
dc.date.available	2017-09-12T20:53:09Z
dc.date.issued	2017-06-30
dc.description.abstract	In most emerging markets, the lack of acceptable collateral is often cited as a key constraint on the provision of credit to agriculture. Three main types of collateral are typically used to finance agriculture: farmland, equipment, and agricultural commodities. In many economies, however, the ability to use farmland as collateral is hindered by the absence of land titles or by inefficient land markets. Likewise, mortgaging or leasing out equipment is not always possible due to the lack of mechanization in agriculture, the absence of a legal and regulatory framework conducive to leasing, or limited secondary markets for equipment in case of default. As a result, the third option, use of agricultural commodities as collateral, is increasingly being explored in various countries, particularly in Latin America, South Asia, and East Africa, where financial institutions have developed credit products that use commodities as collateral for lending. Such agricultural commodities have an established value and market where quick liquidation mechanisms can in theory provide sufficient funds to cover a loan extended against them in case of a default. Overall, commodity-backed finance using agricultural inventories is an important component of a holistic approach to making agricultural credit and professional storage more accessible. In turn, more accessible credit and storage can contribute to food security by: (1) increasing local food processing capacity; (2) reducing post-harvest losses;2 (3) improving the quality of the goods stored under better conditions; and (4) potentially improving incomes for farmers (through a combination of lower postharvest losses and better prices from delayed marketing).	en
dc.identifier	http://documents.worldbank.org/curated/en/619781498850171182/Using-commodities-as-collateral-for-finance-commodity-backed-finance
dc.identifier.doi	10.1596/28318
dc.identifier.uri	https://hdl.handle.net/10986/28318
dc.language	English
dc.language.iso	en_US
dc.publisher	World Bank, Washington, DC
dc.rights	CC BY 3.0 IGO
dc.rights.holder	World Bank
dc.rights.uri	http://creativecommons.org/licenses/by/3.0/igo
dc.subject	AGRICULTURE FINANCE
dc.subject	COLLATERAL
dc.subject	COMMODITY-BACKED
dc.subject	VALUE CHAIN FINANCE
dc.subject	CROP RECEIPTS
dc.subject	CONTRACT FARMING
dc.title	Using Commodities as Collateral for Finance (Commodity-Backed Finance)	en
dc.type	Policy Note	en
dc.type	Document de politique générale	fr
dc.type	Documento de políticas	es
dspace.entity.type	Publication
okr.crossref.title	Using Commodities as Collateral for Finance (Commodity-Backed Finance)
okr.date.disclosure	2017-07-12
okr.doctype	Economic & Sector Work::Policy Notes
okr.doctype	Economic & Sector Work
okr.docurl	http://documents.worldbank.org/curated/en/619781498850171182/Using-commodities-as-collateral-for-finance-commodity-backed-finance
okr.guid	619781498850171182
okr.identifier.doi	10.1596/28318
okr.identifier.externaldocumentum	090224b084d7ac66_1_0
okr.identifier.internaldocumentum	27723141
okr.identifier.report	117359
okr.imported	true
okr.language.supported	en
okr.pdfurl	http://documents.worldbank.org/curated/en/619781498850171182/pdf/P162945-06-30-2017-1498850170464.pdf	en
okr.topic	Agriculture::Agricultural Sector Economics
okr.topic	Agriculture::Commodity Risk Management
okr.topic	Finance and Financial Sector Development::Access to Finance
okr.topic	Finance and Financial Sector Development::Rural Finance
okr.topic	Rural Development::Rural Microfinance and SMEs
okr.unit	Finance and Markets Global Practice; Trade and Competitiveness Global Practice