The country’s first collateral management company would be operational by the end of this fiscal year. This was disclosed by the Securities and Exchange Commission of Pakistan (SECP),
The company would provide storage and preservation services for a range of agricultural commodities, and would also issue credible warehouse receipts for agricultural commodity financing.
According to the media reports, the spokesperson said that Finance Adviser Abdul Hafeez Shaikh had recently emphasised the need to introduce formal commodity management and Warehouse Receipt Financing System (WRFS), which he had pointed out was essential to address the issue of post-harvest losses and enhance the farmers’ access to agricultural credit.
According to the spokesperson from SECP:
‘The collateral management ecosystem shall revolutionize the Agri sector and provide a myriad of benefits including but not limited to reduction in post harvest losses. A well-designed warehouse receipt system will enable the development of modern storage infrastructure for agriculture commodities which could save billions of rupees and make the agriculture sector more competitive.
The SECP held a meeting with various the stakeholders including insurance companies, the central bank, commercial banks, mercantile exchange, warehousing companies etc, in Karachi to discuss various issues prior to the launch of the first collateral management company in Pakistan.
“The meeting was also attended by three representatives of the International Finance Corporation (IFC), who have been assisting SECP since the beginning of this process,” the spokesperson said.
The meeting discussed the development of standardized insurance products for warehouse operators, development of standard operating procedures, amendments in Prudential Regulations of SBP to make warehouse receipts acceptable collateral, development of standardized agreements between banks and CMC, etc.
According to regulations,
Any public limited company with an equity of Rs. 200 million or higher will be eligible to seek the permission of SECP to register as a collateral management company.
The meeting also discussed the protection of lenders rights, in case borrower or warehouse operator defaults payments, what recourse is available to banks/lenders, obligations of CMC that need to be properly spelt out, etc. They also suggested that insurance should cover all possible perils so that the lender/depositor is adequately protected.