Relieving Capital Constraints for Rice Farmers – Evidence from Warehouse Receipts System in Senegal

A WRS is an institutional arrangement to provide farmers with more flexibility in marketing decisions and serving as a mechanism to access more credits (Coulter et al., 2002). With this system, farmers can bring agricultural commodities to a certified warehouse and receive receipts certifying the quantity, quality and location of the commodity stored. These receipts provide a secure system whereby stored agricultural commodities can serve as collateral for post-harvest credits. As such, WRS have the potential to generate several interrelated benefits to actors along the value chain. They can provide infrastructures and institutions improving efficiencies along the chain, while generating direct welfare gains for the farmers through capital constraint relief, temporal arbitrage, and improved market access. They also bear the potential to curtail cheating on weights and measures, ease access to finance at all levels in the marketing chain, moderate seasonal price variability and promote instruments to mitigate price risks. Coulter et al. (2002) discussed these potential benefits in terms of: (i) trade facilitation, (ii) market efficiency enhancement, (iii) easing access to rural finance, (iv) mitigating price risks, and (v) cost effective management of food reserves.

The government of Senegal through the Ministry of Commerce, with technical assistance from the IFC, is introducing WRS in the country, through a pilot WRS project in the rice sector in the Senegal valley. The overall objective is to support increased access to finance to value chain actors in the agricultural sector of Senegal, favoring the development of better storage facilities and building capacities of private and public stakeholders. The main activities of this pilot project include (i) creating a legal and regulatory environment for WRS, (ii) sensitization and training of stakeholders on the WRS, (iii) assistance to the warehousing industry. This pilot is very important for the government as lessons learnt will be used to inform scale up to other grains’ value chains and other regions. Above all, it would enable to provide an institutional enforcement mechanism that would enhance trustworthiness of financial institutions toward marginalized populations, promote inclusive growth and improve general welfare.

2018-06-08

2018-12-31

Our primary outcomes of interest are the following:
1- Access to post harvest credit
2- Rice paddy selling price (average selling price per ton)
3- Farmers agricultural income

1- Access to post harvest credit will be measured using survey data on access to credit and using administrative data from the CNCAS (the local bank funding most agricultural activities in the region).

2- Averages of rice paddy selling prices will be measured using high frequency surveys asking farmers to record all their sells.

3- Farmers agricultural income will be measured using farmers survey data as the difference between farmers agricultural inputs (intrants, labor costs, time) and farmers revenue (quantities sold times prices).

Our secondary outcome are the following:
4- Take up of WRS usage
5- Rice storage and inventories
6- Marketed surplus
7- Quality of rice paddy sold
8- Post-harvest losses

4- Take up of WRS usage: Indicator variable for whether the GIE/farmer stored part of the harvest in the program warehouses. This is an indicator of take-up. Measured using administrative data from the warehouse and from farmers survey data.

5- Rice storage and inventories: Quantities of Paddy in storage at various points in time during post-harvest period. Measured using high frequency surveys of farmers.

6- Marketed surplus: Total share of rice production sold by the following season. Measured using high frequency survey of farmers.

7- Quality of rice paddy sold : Grade score of paddy rice at time of destorage. Measured using high frequency surveys of farmers.

8- Post-harvest losses: Quantity of rice paddy lost (not sold and not consumed). Measured using high frequency surveys of farmers.

This project will focus on the following two main research questions:
Q1 – What is the impact of participating in the WRS on rice producers’ access to credit, rice selling prices, and agricultural income?

Q2- What is the impact of the WRS on selling prices inside producer groups?

The program will be implemented in one warehouse located in the village of Diagambal in the Senegal river valley. We estimate that rice producers living within 50km of this warehouse could be interested by the program.
There are two types of rice producers leaving within 50km of the warehouse: those who are organized in associations called group of producers and those who are independent. Our experimental design will be different for both groups.

For producers organized in group, our experimental design relies on a two-stages randomization. We will first randomize group of rice producers interested by the program into a treatment and a "pure" control group. Second, within treated group of producers, we will randomly allocate farmers who volontered for the program into a "final" treatment group benefiting from the program and a "spilover" control group composed by farmers not benefiting from the program who belongs to treated groups of producers.
The random selection ensures that the farmers in treatment and control groups are similar and that the comparison of these groups after the program implementation provides unbiased estimates of the impacts of the program.
The comparison of the "pure" control group with the "spilover" control group will allow us to measure indirect effects of the impact and local general equilibrium effects.

For independent rice producers, we will randomly allocate individual producers interested by the program into a treatment group that will receive the program and a control group that will not. This means that we will not be able to answer to our second research question on local impact on prices for independent producers.

Randomization in office done using a computer.
Stratification on farmers and group of farmers characteristics will be done using baseline survey data.

For rice producers who are organized in groups there will be two levels of randomization: groups of rice producers will be first randomly allocated into a treatment and a "pure" control group. Second, within treated group of producers, 5 producers will be randomly allocated to the "final" treatment group receiving the program.

For independent rice producers (not organized in group), the randomization will be done at the individuel level.

Yes

We identified 138 group of producers.

10 rice producers (on average) per group of producers will be included in the sample. So 1380 rice producers in total. 110 independent rice producers will be included in the study.

For groups of producers:
- Treatment group: 69 groups of producers, 345 producers in final treatment group and 345 producers in "spilover" control group
- Pure control group: 69 groups of producers, 690 rice producers.

For independent rice producers:
- Treatment group: 55 producers
- Control group: 55 producers