Formation of the Collateral Management Company on Warehouse-receipts-based financing

The agri-financing regime based on electronic warehouse receipts (eWHRs) was launched in Pakistan’s agriculture sector after preparations and pilots have brought the regime to full readiness.

The regime will not only bring financial access to farmers but also create strong incentives for crop testing, grading, and standardization, proper storage, reduction in post-harvest losses, and preservation of crop quality for exports. There is sufficient storage capacity in Pakistan’s crop value chains to launch this regime. It will create an eco-system that will attract much-needed investment in near-farm storage. Pakistan Agricutural Coalition (PAC) has facilitated the creation of Pakistan’s first collateral management company, Naymat and is providing support to the eWHR regime by serving on Naymat’s board, providing services to its management team, and advising the SECP on development of crucial regulations.

PAC team members were requested by IFC, at the behest of the State Bank of Pakistan, to develop an analytical report on the hurdles to scale-up of the Electronic Warehouse Receipts (EWR) regime. The report involved a deep-dive into the maize, rice paddy, wheat, and potato crops to identify the key participants in each value chain and their interactions with each other to help identify ways to expand the EWR regime.

Based on this extensive knowledge of Naymat’s crop value chains, the Naymat Board requested its Business Development Committee, chaired by PAC Strategy Advisor Kazim Saeed, to develop a new business model with full financials which can become the basis for fund-raising for Naymat. This exercise, supported by PAC, yielded a pitch deck for a warehousing business to be developed under Naymat’s own management to kick-start the regime (already supported by SECP which is Naymat’s regulator).

As part of this effort, a financial model of such a warehousing company was formulated where the primary model is to lease warehousing facilities, upgrade them and swiftly establish a network of accredited warehouses (both flat and silos) with possible participation of Vallis of UK. The CEO of Naymat Collateral has presented this model to the Board of Directors of the company for their review and received full support from the Board. After a financial advisor is appointed by Naymat, fund-raising for this company will be conducted, and processors and exporters will be identified to secure purchase agreements with, so that warehouses can be established and the EWR regime can be scaled up.