ECX warehouse receipt can be used as collateral

Ethiopia Commodity Exchange (ECX) is in the process of giving out warehouse receipts to traders to use as collateral when they need short term loans from the banks. The new service expected to begin this fiscal year, has not yet gone over their plans with stakeholders. The following will be written on the ECX warehouse receipt: the serial number, name and location of warehouse, license number, date of receipt and duration of storage, name of commodity, quantity, quality, grading and standardization.
The loan amount depends on the nature of the commodity, its market price and minimum support price. The bank gives the loan if the collateral manager approves the stock in storage.
The depositor endorses the warehouse receipt in favor of bank and takes a loan against the commodity. Once the bank receives the loan from the buyer, the commodity can be released.
Wendemagen Negera CEO of ECX said the system will allow ECX’s traders to find another financial option for their business.
“Usually land tittle deeds and vehicles are used for collateral when business people need loans from banks but with different agricultural products including sesame and coffee that are stored and traded in our stores have values and can be used for collateral  for bank loans.”
“Now we are working to use the stored products as a collateral which I expect to happen soon.’’
Currently ECX uses the stored products to transact with buyers and sellers.
In related news ECX signed an agreement with Abay Bank to allow commodity buyers and sellers to transact through the bank.
Abay is the 15th bank to work with ECX on these issues.
At the signing ceremony Yewhala Gesesse, Abay Bank President said the deal will enable traders use financial services easily.
“We are happy to serve ECX traders to use our banks for their transaction and we will serve them to facilitate there work in efficient ways. “
Currently Abay Bank has 167 branches across the county while ECX has 52 stores in the country and it has planned to build  five stores in this  fiscal year.