System Council (WRSC) in a Sh237.5 million ($1.9 million) deal that will include helping mobilise private sector investment into the recently established system.
The IFC said in disclosures published last week that the three-year advisory programme which will run until August 2025 will also involve the education of farmers on the benefits of utilising certified warehouses for crop storage in order to minimise post-harvest losses and get better prices for their produce.
The Warehouse Receipt System (WRS) allows farmers to hold their produce in certified warehouses where they can be tested, cleaned, graded and stored with the owners of the commodity receiving a receipt as proof of ownership.
It was mooted to protect farmers from middlemen who take advantage of their lack of storage facilities to buy produce at below-production prices and to improve the supply of food in the country by cutting post-harvest losses.
The IFC’s move to take a role in mobilising investment will likely see the entry of foreign firms into the sector, particularly in setting up of new warehouses, given its wide reach and network globally.
“Together with the Government of Kenya and the private sector, IFC will identify a pipeline of bankable investments in the warehousing value chain, including support to product development and investment into warehousing infrastructure, banking products, insurance, and collateral management,” said the IFC in the advisory support disclosure.
This month, the council certified farmer service company AFEX Fair Trade a licence to operate as a warehouse receipt operator, marking the first time the certification has been issued to a private sector firm.
The firm targets to transact with 100,000 farmers, and trade over 500,000 tonnes of commodities by 2025.
Kenya formally launched its WRS in January 2022, two-and-a-half years after Parliament passed The Warehouse Receipt System Act which provides the legal and regulatory framework backing the WRS and the council.
The IFC is now expected to provide institutional support for the council and the implementation of the regulations, which are expected to back the development of a commodities exchange in the country down the road.
“This will provide clarity on warehouse receipts, the legal status of warehouse receipts, rights and obligations of warehouse operators and banks and structure of warehouse receipts regulatory body, guarantee performance and minimize fees and cost of regulation,” the IFC said.
“Additionally, IFC will support the development of operational guidelines for a model of supervised private warehouse operations – these guidelines will focus on warehouse quality, warehouse operations including inspections, grading and commodities standards.”
The lack of a reliable crop storage system has led to Kenya’s agriculture sector punching below its weight despite being the majority creator of jobs in the economy, with a long value chain between the farm and the market.
The unreliability in earnings due to post-harvest losses and the boom-and-bust system that comes with a quick disposal of produce after harvest, especially for smallholder farmers, has made it difficult for farmers to access formal credit in the country.